Game Theory: Thinking in Moves

Most of the decisions you’ve practised so far had one thing in common: the world might react to your move, but it didn’t plan against you. A rock doesn’t care where you stand. The market doesn’t hold a grudge. But the moment your outcome depends on what another deciding mind chooses — a rival firm, a negotiating partner, the driver merging beside you, the other nation at the table — you’ve stepped into a different kind of problem. Your best move now depends on their move, and their best move depends on yours, and you are both reasoning about each other reasoning about each other. That circular, strategic interdependence is the subject of game theory.

Game theory is the mathematics of strategic decisions — situations where the payoff to your choice depends on the choices others make at the same time. It was built in the 1940s by the mathematician John von Neumann and the economist Oskar Morgenstern, sharpened by John Nash into the single idea this whole course orbits — the equilibrium, a combination of choices where no one can do better by changing their move alone. It has since become the common language of economics, evolutionary biology, political science, military strategy, business competition, and the design of everything from auctions to dating apps. Not because the world is a literal game, but because any situation with players, choices, and interdependent payoffs has the same skeleton — and once you can see that skeleton, a startling range of conflicts suddenly reads the same way.

This is an advanced course, and it earns the label by composing two models you already hold. From incentives you know that people don’t do what you want, they do what they’re rewarded for — game theory is what happens when everyone is following their incentives at once and those incentives collide. From second-order thinking you know to ask “and then what?” — game theory is that question turned into a loop: if I do this, they’ll do that, so then I’d do this, so they’d… By the end you’ll be able to read a situation as a payoff matrix, find the dominant strategy when one exists, locate the Nash equilibrium where the reasoning settles, recognise the prisoner’s dilemma that explains why rational individuals so often produce a collectively worse result (the deep structure beneath the tragedy of the commons), and — most usefully — understand how repetition and reputation crack that trap and let cooperation emerge among players who are nobody’s idea of saints. You’ll learn to tell a zero-sum fight from a positive-sum one, and why mistaking the second for the first is one of the most expensive errors a strategist can make. The board is set. Let’s learn to read it.