Game theory studies strategic decisions. It looks at situations where the outcome for one person depends on what others do. Chess, poker, and nuclear standoffs all fit the model. So do everyday choices like whether to merge in traffic or split a restaurant bill.

The core idea is that players think about each other's thinking. A rational player chooses a strategy based on what they expect others to choose. The most famous solution concept is the Nash equilibrium, where no player can improve by changing strategy alone. The prisoner's dilemma shows how rational players can end up worse off than if they had cooperated.

Game theory began in economics but spread to biology, political science, and computer science. It helps explain arms races, auction design, and why companies sometimes match competitors' prices. Real people are not always rational, which is where behavioral economics picks up.

Key concepts

• Players and strategies
• Payoffs and outcomes
• Nash equilibrium
• Prisoner's dilemma
• Zero-sum vs. non-zero-sum games