Game theory is the science of strategy. It attempts to determine mathematically and logically
the actions that "players" should take to secure the best outcomes for themselves in a wide
array of "games". The games it studies range from chess to child rearing and from tennis to
takeovers. But the games all share the common feature of interdependence. That is, the outcome
for each participant depends upon the choices (strategies) of all. In so-called zero-sum games
the interests of the players conflict totally, so that one persons gain always is another's loss.
More typical are games with the potential for either mutual gain (positive sum) or mutual harm
(negative sum), as well as some conflict.
Game theory was pioneered by Princeton mathematician John von Neumann. in the early years the
emphasis was on games of pure conflict (zero-sum games). Other games were considered in a
cooperative form. That is, the participants were supposed to choose and implement their actions
jointly. Recent research has focused on games that are neither zero-sum nor purely cooperative.
In these games the players choose their actions separately, but their links to others involve
elements of both competition and cooperation.
Games are fundamentally different from decisions made in a neutral environment. To illustrate the
point, think of the difference between the decisions of a lumberjack and those of a general. When
the lumberjack decides how to chop wood, he does not expect the wood to fight back; his environment
is neutral. But when the general tries to cut down the enemy's army, he must anticipate and overcome
resistance to his plans. Like the general, a game player must recognize his interaction with other
intelligent and purposive people. His own choice must allow for both conflict and for possibilities
for cooperation.
The essence of a game is the interdependence of player strategies. There are two distinct types of
strategic interdependence:sequential and simultaneous. In the former the players move in sequence,
each aware of the others' previous actions. In the the latter the players act at the same time, each
ignorant of the others' actions.
A general principle for a player in a sequential-move game is to look ahead and reason back. Each
player should figure out how the other players will respond to his current move, how he will respond
in turn, and so on. The player anticipates where his initial decisions will ultimately lead, and
uses this information to calculate his current best choice. When thinking about how others will
respond, one must put oneself in their shoes and think as they would; one should not impose one's
own reasoning on them.