Gamification and Game Theory are two different things. According to Game Theory Strategies, Gamification is a way to get the people more involved in an activity by using game play mechanics. Additionally, rewards are given to encourage particular behaviors. Our class, for instance, has been using gamification in order to make the lessons more engaging and easier to understand. On the other hand, game theory is analyzing strategic situations where a person’s strategy is dependent on the choices of others (Game theory and gamification are not the same thing, n.d.).
I would like to start with just a little background on the history of game theory. The game theory was first proposed by a Hungarian-American mathematician named John von Neumann. The theory only existed as a unique field when he published a paper in 1928 using Brouwer’s fixed-point theorem as proof, which became the standard method in the theory. John von Neumann then wrote a book entitled “Theory of Games and Economic Behavior” in 1944 which concluded his work on game theory. In 1950, notable mathematicians Merrill M. Flood and Melvin Dresher framed the prisoner’s dilemma which is a standard example of the game theory. Around that time frame, American mathematician John Forbes Nash Jr developed a principle strategy known as Nash equilibrium. It is applicable to a wider variety of games than the principle proposed by John von Neumann and Oskar Morgenster (Game theory, n.d.). The Nash equilibrium represents the best outcome for both players.
Game theory is used in a wide variety of disciplines, but it is mostly used in the study of economics especially in the analysis of the interaction between two or more industries. According to Investopedia, the game theory is “the process of modeling the strategic interaction between two or more players in a situation containing set rules and outcomes”. In other words, you study how the people react to strategic situations in game theory. This theory is used in a situation with two or more players that involves quantifiable consequences. For example, in the prisoner’s dilemma the quantifiable consequence is the number of years the prisoners will stay in jail (McNulty, 2008).
There are a few terms we need to know in the game theory. The first term we need to now is game. A game is defined as “any set of circumstances that has a result dependent on the actions of two or more players”. In other words, a game refers to any situation where in the player’s course of action is dependent on the decisions of the other players. The second term is players. Players refer to the decision makers. The third term is strategy. A strategy is the plan of action a player will take. The fourth term is payoff. The word payoff refers to the outcome or consequence the player receives that is in a quantifiable form (McNulty, 2008).
It was mentioned above that the prisoner’s dilemma is a standard example of the game theory. The prisoner’s dilemma shows how two rational individuals might not cooperate with each other, even if it is in their best interest. Albert W. Tucker explained the games as:
Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge. They hope to get both sentenced to a year in prison on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. (Prisoner’s dilemma, n.d.)
The payoffs are the following: If A and B both confess, they will both serve 2 years in prison. If A confesses but B remains silent, A will be set free while B will serve 3 years in prison and vice versa. If both A and B do not confess, they will both just serve only 1 year in prison (Prisoner’s dilemma, n.d.).
Game theory can be used to understand the political decisions of the political figures. For example, China still continues to support North Korea up to this day. This is because China prefers them to be in charge rather than the Americans or South Korea (Game theory and North Korea, n.d.). This theory can also be used in the business field. For instance, if you are given two offers, you will mostly likely go for the offer that benefits you the most. Another example would when you are trying to cross the street. If one person tries to cross, the rest of the people will immediately follow and the cars will stop to let the people pass.
References:
Game theory. (n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Game_theory
Game theory and gamification are not the same thing. (n.d.). Retrieved from Game Theory Strategies: http://www.gametheorystrategies.com/2011/07/06/game-theory-and-gamification/
Game theory and North Korea. (n.d.). Retrieved from Game Theory Strategies: http://www.gametheorystrategies.com/2013/04/08/game-theory-north-korea/
McNulty, D. (2008). The Basics Of Game Theory. Retrieved from Investopedia: http://www.investopedia.com/articles/financial-theory/08/game-theory-basics.asp
Prisoner’s dilemma. (n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Prisoner%27s_dilemma