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Economics
Game Theory
The study of strategic decision-making where one person's choice affects what others should do.
Game theory is used in pricing, auctions, negotiations, and even central bank decisions. The most famous example is the Prisoner's Dilemma. It shows why rational individuals sometimes make choices that are bad for everyone.
It's chess for economists — every move you make changes what your opponent should do next.
Real world: Two rival supermarkets deciding whether to lower prices. If both lower prices they both lose profit. Game theory helps them predict what the other will do and whether to cooperate or compete.
💡 Game theory explains why smart people sometimes make decisions that hurt everyone — including themselves.