Game theory involves logical theory. The researcher uses logic in order to evaluate. It deals with two terms, namely ‘cooperation’ and ‘payoffs.’ Game theory explains the incentive conditions that are required for cooperation. It also provides help to researchers in making strategic decisions. It provides help to researchers as it helps them develop models that are related to bargaining and deterrence.
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The prisoner’s dilemma in Game theory is a classical game. This game involves the participation of two players who begin with a particular amount with them. This game depicts the situation that is bad for both players participating because of their non-cooperation. In this, the players would be in better shape if they had cooperated.
The strategies in Game theory are basically the plans that involve an action, and the purpose of the strategies is to secure the most favorable game value for the future games in the long run. An example of the strategy in Game theory is ‘tit for tat,’ in which the player reciprocates the action of the other player in the game. A pure strategy is always employing the same strategy by the player in the game. A mixed strategy is making a random choice, which involves the employing of one’s best strategies. This strategy is employed by the player in order to maximize the value of the favorable game in cases when the usage of pure strategy gives the opponent an advantage of predictability.
A game matrix in Game theory is the table that consists of all the strategies of player A in the columns against the strategies of the player B in the rows. The values that are assigned in each cell are the payoff value. This matrix in Game theory consists of a minimax value, a maximin value and a saddle point.
The game in Game theory is considered a fair one only if the value of a game equals either person’s odds played against any single strategy of the opponent.
Even though Game theory is a branch of logic, it should not be misinterpreted by the researcher to be purely logic.
There are certain assumptions that are made in Game theory and they are as follows:
It is assumed that players should reply rationally on the basis of the payoffs in the game.
One of the most frequently employed assumptions is that of conservative rationality. In this assumption, the players choose the strategies that account for the maximum average gains or minimum average losses to the player using that strategy.
A very strange assumption is made in Game theory and it involves the conditions of full information. Such conditions are assumed but are rarely met in the real world.