This chapter formally introduces game theory. It provides a simple definition as the study of interactive decision-making by rational decision makers. Game theory is a formal study of vicarious thinking. A number of introductory terms are introduced, including “game,” “player,” and “payoff.” Concepts, including “rational actor,” “defect,” and “equilibrium” are discussed, and the point is made that a player's goal is to maximize his personal outcome, not to “beat” the other player. A history of game theory and its ideas as seen through the prism of two key figures—John von Neumann and Thomas Schelling—is entertainingly told by BBC presenter and Financial Times correspondent Tim Harford in an excerpt from his book The Logic of Life entitled “Las Vegas: the Edge of Reason.”
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