3 game theory tactics, explained

Game theory is the study of decision-making in strategic situations, where individuals interact to achieve their own interests. It was developed by John von Neumann and Oskar Morgenstern as a mathematical theory to make sense of human interactions under conditions of uncertainty over time. Originally applied in economics, it has since been expanded to various fields such as biology, international relations, and interpersonal relationships.

Game theory has shown that seemingly competitive interactions, like the Cold War, can actually have opportunities for mutual cooperation. The START Treaty negotiated by Reagan and Gorbachev broke down the process of eliminating nuclear weapons into small parts to ensure both parties were cooperating. This approach transformed a potentially zero-sum game into a positive interaction.

Poker and Decision Making Poker teaches decision-making in uncertain situations, similar to life's uncertainties. The key is to extract the most value from a strong hand and minimize losses with a weak hand. Constructing mathematically optimal strategies for each situation is crucial.

The Sunk Cost Fallacy 'Sunk cost fallacy' leads people to continue investing in something despite clear evidence that it's not beneficial. This bias can be costly, causing individuals to stick with unfulfilling endeavors due to past investments of time or effort. Recognizing this fallacy allows for better decision-making towards future outcomes.

Game theory focuses on analyzing zero-sum games to determine the best strategy. The minimax strategy involves minimizing your maximum loss when facing a sophisticated opponent, ensuring protection against worst-case scenarios and maximizing performance in zero-sum games.