To put it simply, game theory is to study how decision-makers make decisions to maximize their own utility under a given information structure, and the decision-making equilibrium game theory between different decision-makers consists of three basic elements: one is the decision-making subject (player), which can also be translated as a participant or player; Second, the given information structure can be understood as the strategy and action space that participants can choose, also called strategy set; The third is utility, which is the income that participants can define or quantify, and it is also what all participants really care about, also known as preference or payment function. Participants, strategy sets and utility constitute a basic game.
Game theory can be divided into cooperative game and non-cooperative game. The difference between them lies in whether the participants can reach a binding agreement in the game process. If not, it is called non-cooperative game, which is the focus of modern game theory. For example, A and B cooperate to build a VCD production line. Both parties agree that Party A will provide the technology for VCD production, and Party B will provide the plant and equipment. A non-cooperative game is formed when evaluating technical equipment assets, because all parties try to maximize their own evaluation value. At this time, if Party B can obtain competitive information such as Party A's true evaluation of technology or reference quotation, it can give itself an advantage in the evaluation; Similarly, so does Party A.. As for whether their own assets evaluation will affect the "collective interests" such as the overall operating efficiency of the cooperative enterprise, they will not attach great importance to it. This is a non-cooperative game. When participants choose their own actions, the priority is how to safeguard their own interests.
Cooperative game emphasizes collectivism and collective rationality, namely efficiency, fairness and justice. Non-cooperative game emphasizes individual rationality and individual optimal decision-making, and the result is sometimes efficient and sometimes inefficient.
Game theory emphasizes the importance of time and information, which are the main factors affecting the game equilibrium. In the game process, the information transmission between participants determines their action space and the choice of optimal strategy; At the same time, there is always a priority problem in the game process, and the action order of participants directly affects the final equilibrium of the game.
The game can be divided from the action sequence of participants and their understanding of the characteristics, strategic space and payment of other participants. Whether information is understood or not is carried out from two angles. Four kinds of games are obtained from two angles: complete information static game, complete information dynamic game, incomplete information static game and incomplete information dynamic game. Its representatives are Nash, Zelten and Hasani. Strictly speaking, game theory is not a branch of economics, it is just a method, which is why many people regard it as a branch of mathematics. Game theory has been widely used in politics, economy, diplomacy and sociology, providing a valuable method for solving conflicts and cooperation between different entities.
Game theory can prove many interesting problems in real life. For example, hard-working people don't get much, public resources are overused, and uncooperative people choose to cooperate with bad people to do good things for a while. Although these conclusions are based on a strong assumption that participants are rational and tend to maximize their own utility. But its conclusion has profound philosophical connotation.
At present, the principal-agent system and incentive theory in economics can be analyzed by game theory. Under the background of cooperation, there are many cases of competition among modern enterprises. For example, oligarchs A and B who monopolize the market can agree to specify a certain output, such as the oil output of the Gulf countries, in order to maintain their maximum profits. But many times, in order to maintain their local profits, they always increase production. For example, Saudi Arabia often increases production without authorization, resulting in falling prices and loss of profits. In this case, competitive intelligence often plays an important role. If A grasps the competitive intelligence such as B's actual production capacity, it can adjust the output and even break through the agreement, thus forming a new equilibrium.