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| title | chunk | source | category | tags | date_saved | instance |
|---|---|---|---|---|---|---|
| Game theory | 11/13 | https://en.wikipedia.org/wiki/Game_theory | reference | science, encyclopedia | 2026-05-05T03:56:32.715747+00:00 | kb-cron |
=== Trust game === The Trust Game is an experiment designed to measure trust in economic decisions. It is also called "the investment game" and is designed to investigate trust and demonstrate its importance rather than "rationality" of self-interest. The game was designed by Berg Joyce, John Dickhaut and Kevin McCabe in 1995. In the game, one player (the investor) is given a sum of money and must decide how much of it to give to another player (the trustee). The amount given is then tripled by the experimenter. The trustee then decides how much of the tripled amount to return to the investor. If the trustee is completely self-interested, then they would return nothing. However, experiments have shown that this isn't the expected behavior of the trustee. The outcome instead suggests that people are willing to place trust, by risking some amount of money, in the belief that there will be reciprocity.
=== Cournot Competition ===
The Cournot competition model involves players choosing quantity of a homogenous product to produce independently and simultaneously, where marginal cost can be different for each firm and the firm's payoff is profit. The production costs are public information and the firm aims to find their profit-maximizing quantity based on what they believe the other firm will produce and behave like monopolies. In this game firms want to produce at the monopoly quantity but there is a high incentive to deviate and produce more, which decreases the market-clearing price. For example, firms may be tempted to deviate from the monopoly quantity if there is a low monopoly quantity and high price, with the aim of increasing production to maximize profit. However this option does not provide the highest payoff, as a firm's ability to maximize profits depends on its market share and the elasticity of the market demand. The Cournot equilibrium is reached when each firm operates on their reaction function with no incentive to deviate, as they have the best response based on the other firms output. Within the game, firms reach the Nash equilibrium when the Cournot equilibrium is achieved.
=== Bertrand Competition ===
The Bertrand competition assumes homogenous products and a constant marginal cost and players choose the prices. The equilibrium of price competition is where the price is equal to marginal costs, assuming complete information about the competitors' costs. Therefore, the firms have an incentive to deviate from the equilibrium because a homogenous product with a lower price will gain all of the market share, known as a cost advantage.
== In popular culture == Based on the 1998 book by Sylvia Nasar, the life story of game theorist and mathematician John Nash was turned into the 2001 biopic A Beautiful Mind, starring Russell Crowe as Nash. The 1959 military science fiction novel Starship Troopers by Robert A. Heinlein mentioned "games theory" and "theory of games". In the 1997 film of the same name, the character Carl Jenkins referred to his military intelligence assignment as being assigned to "games and theory". The 1964 film Dr. Strangelove satirizes game theoretic ideas about deterrence theory. For example, nuclear deterrence depends on the threat to retaliate catastrophically if a nuclear attack is detected. A game theorist might argue that such threats can fail to be credible, in the sense that they can lead to subgame imperfect equilibria. The movie takes this idea one step further, with the Soviet Union irrevocably committing to a catastrophic nuclear response without making the threat public. The 1980s power pop band Game Theory was founded by singer/songwriter Scott Miller, who described the band's name as alluding to "the study of calculating the most appropriate action given an adversary ... to give yourself the minimum amount of failure". Liar Game, a 2005 Japanese manga and 2007 television series, presents the main characters in each episode with a game or problem that is typically drawn from game theory, as demonstrated by the strategies applied by the characters. The 1974 novel Spy Story by Len Deighton explores elements of game theory in regard to cold war army exercises. The 2008 novel The Dark Forest by Liu Cixin explores the relationship between extraterrestrial life, humanity, and game theory. Joker, the prime antagonist in the 2008 film The Dark Knight presents game theory concepts—notably the prisoner's dilemma in a scene where he asks passengers in two different ferries to bomb the other one to save their own. In the 2018 film Crazy Rich Asians, the female lead Rachel Chu is a professor of economics and game theory at New York University. At the beginning of the film she is seen in her NYU classroom playing a game of poker with her teaching assistant and wins the game by bluffing; then in the climax of the film, she plays a game of mahjong with her boyfriend's disapproving mother Eleanor, losing the game to Eleanor on purpose but winning her approval as a result. In the 2017 film Molly's Game, Brad, an inexperienced poker player, makes an irrational betting decision without realizing and causes his opponent Harlan to deviate from his Nash Equilibrium strategy, resulting in a significant loss when Harlan loses the hand.