In 1950, two prisoners who never met changed how we think about cooperation. They weren’t real — they were a thought experiment dreamed up at the RAND Corporation — but the trap they were caught in turned out to describe the arms race, overfishing, price wars, doping in sport, climate negotiations, and the reason your group project had three people doing nothing. Two people, each acting completely rationally in their own interest, each making the individually smart choice — and the two of them ending up worse off than if they’d both done something they had every personal reason not to do. That’s not a paradox or a trick. It’s the signature of a whole class of situations, and learning to see it coming is most of what this course is for.
Here’s what makes those situations special. Up to now, the decisions you’ve practised have been against a world that reacts but doesn’t plan. When you think second-order about widening a highway, the extra drivers show up — but the road wasn’t trying to outwit you. Game theory begins exactly where that stops being true: when the thing on the other side of your decision is another mind, choosing at the same time, trying to do well for itself — possibly by reading your mind first.
The one idea behind the whole course
A game, in this technical sense, has nothing to do with fun. It’s any situation with three ingredients: players (the decision-makers), strategies (the choices each can make), and payoffs (what each player gets for every combination of choices). The defining twist — the thing that makes it a game and not just a decision — is that your payoff depends not only on what you pick but on what they pick too. You can play your best card and still lose because of a card in someone else’s hand.
That interdependence is why ordinary “just pick the best option” thinking breaks down. There often is no best option in the absolute — only a best response to what the other player does, which depends on their best response to you, which depends on you. Game theory is the toolkit for cutting through that hall of mirrors and finding where the reasoning actually lands.
Before you read — take a guess
You run one of two petrol stations on the same corner. You're deciding whether to cut your price. Why is this a 'game' in the technical sense, when deciding how much petrol to buy for yourself is not?
Why you’re ready for this now
This course sits near the top of the ladder because it doesn’t introduce a new instinct so much as combine two you’ve already built.
- From incentives, you learned that people respond to the reward structure they’re actually facing, not to your hopes about them. Game theory is what you get when you take that seriously for every player at once and watch their incentives crash into each other.
- From second-order thinking, you learned to ask “and then what?” Game theory turns that single question into a back-and-forth: if I do this, they’ll do that, so I’d do this… — and then asks where that chain stops. The place it stops has a name, and finding it is the central skill you’ll build.
The one-sentence version
Game theory is second-order thinking aimed at another strategist: when your payoff depends on a choice someone else is making for their own reasons, you can’t just pick what’s best — you have to find the move that’s best given that they’re doing the same calculation about you.
What you’ll be able to do by the end
This isn’t abstract maths for its own sake. Each model is a lens you’ll be able to point at real conflicts — salary negotiations, competitor pricing, team dynamics, public-goods problems, treaty talks — and suddenly see the structure. The route:
- The Game and the Matrix — the three ingredients made concrete, and the payoff matrix: the little grid that captures an entire strategic situation at a glance. You’ll drive an interactive one.
- Dominant Strategies — the lucky case where one move is best no matter what the other player does, so you don’t even need to predict them. And why it’s rarer than it looks.
- Nash Equilibrium — John Nash’s idea of where the reasoning settles: the combination where no player can do better by changing their own move alone. The single most important concept in the field.
- The Prisoner’s Dilemma — the famous trap where two rational players both defect and both lose, even though both would prefer mutual cooperation. The hidden engine under arms races, price wars, and the tragedy of the commons.
- Repeated Games — the way out. When the same players meet again and again, reputation and retaliation make cooperation rational. Meet tit-for-tat and the famous tournaments that crowned it.
- Coordination, Chicken & the Zero-Sum Trap — beyond the dilemma: games of trust (the stag hunt), nerve (chicken), and the costly mistake of treating a positive-sum situation as if it were zero-sum.
Then a Final Exam — graded, one question at a time, one-way: once you answer, it locks. No back button, no retries.
How to use this course
The same rule as ever: guess before you peek. When you hit an exercise, commit to an answer before revealing anything — the sting of being wrong is what makes the idea stick. Game theory is especially seductive to nod along to and especially easy to get wrong under pressure, so the exercises matter more here than usual.
Next up: we build the payoff matrix from scratch — the single most useful object in the whole field, and the workbench every later idea is assembled on.