One of the most fascinating areas of mathematics and economics is known as game theory.

Game theory involves analyzing competitive situations where multiple participants make independent decisions.

In other words, the result will depend not just on what you decide, but what on someone else decides as well.

Game theory is applications not just in games, but in business, personal relationships, international diplomacy, and war.

Learn more about game theory, how it applies to different areas of life on this episode of

Everything Everywhere Daily. The Game Theory is on one hand very simple to understand and on another hand it can involve very complex mathematics.

This episode will just touch on the basics of game

theory to give you a better idea of what game theory is and how to think of it in a

rational manner like a game theorist. For the purposes of this discussion, a game is any social situation where there are multiple parties who make strategic decisions, where the outcome is determined by the decisions of the parties involved.

So a game is not limited to a game like the type

children play, but in this case it can mean literally anything including

negotiation, setting prices, or planning a battle. There can be many different types of games,

cooperative versus non-cooperative, zero-sum versus non-zero-sum, finite versus

infinite, symmetric, asymmetric, versus Sequential, and many others. So let's start with probably the simplest

case, a game of Tic-Tac-Toe, or as some of you might know it, knots and crosses. The first time you ever played it was probably when you were a child.

It didn't take long to figure out that the outcome of the game didn't just depend on what you did,

but also on what your opponent did. It then probably didn't take too long to figure out exactly what your opponent would do

based on what you would do and that you could play to a draw almost every single time.

That's why adults never play tic-tac-toe.

But let's take another example, one that's more complex and is the quintessential example used to demonstrate game theory, the Prisoner's Delema.

In this game, assume that you and your partner in crime robbed a bank and were captured by the police.

The police separate you and try to get each of you to implicate the other. Also assume that you have no

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