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| A tree diagram of an extensive form game, used to formalize games with some important order of events |
Game theory is most often described as a branch of
applied mathematics and
economics that studies situations where players choose different actions in an attempt to maximize their returns. The essential feature, however, is that it provides a formal modelling approach to social situations in which decision makers interact with other minds. Game theory extends the simpler, optimization approach developed in neoclassical economics.
The field came into being with the 1944 classic Theory of Games and Economic Behavior by John von Neumann and Oskar Morgenstern. A major center for the development of game theory was RAND Corporation where it helped to define nuclear strategies. Game theory is now used in many diverse academic fields, ranging from biology and psychology to sociology and philosophy. Beginning in the 1970s, game theory has been applied to animal behavior, including species' development by natural selection. Because of games like the prisoner's dilemma, in which rational self-interest hurts everyone, game theory has been used in political science, ethics and philosophy. Finally, game theory has recently drawn attention from computer scientists because of its use in artificial intelligence and cybernetics.
