Not just in the movies
Game theory sounds like a lot of fun but it’s not, as the name might suggest, about plotting how to win a game of chess or Monopoly. Game theory relates to situations when decisions depend on the actions of others. The eZonomics article What is … game theory outlines famous references to it (such as the film A Beautiful Mind and research awarded the 2012 Nobel Prize in Economics) and details perhaps the most well-known game theory illustration the “Prisoner’s Dilemma”. It explains how “games” are a representation of a real world situation and “players” try to pick the best result for themselves – while factoring in the moves other “players” may make.
Game theory in the home
Game theory is useful for understanding the way individuals and families choose to spend, save and make other decisions, usually so the best outcome for everybody is obtained. In the home, writes Spousonomics author Jenny Anderson, choices about the division of housework or what to do for entertainment can be managed through game theory system. Likewise, how to spend and invest can all be thought of as “games”. Family members are players and managing the household budget is the game. Players try to find the best outcome, possibly using techniques of negotiation and bargaining to set savings goals for areas they think are important and spending on what they think is best.