CODEX 002: Game Theory (2024)

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“The true source of uncertainty lies in the intentions of others.”

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That’s Game Theory in a nutshell according to economist Peter L. Bernstein, who was probably pretty good at Rock-Paper-Scissors. To win consistently, it’s not about knowing your best move but rather predicting your opponent’s move — not playing the game, but gaming the player.

A system of thinking about everything from poker to parcheesi to the Prisoner’s Dilemma, Game Theory is an attempt to figure out how and why people make decisions. Sounds a lot like marketing to us.

But Game Theory also depends on mathematical models with rational agents — players who make decisions based on reason and logic. Outside of math class, however, human behavior is inexorably irrational and almost entirely emotional. This can confound those of us who make our living trying to predict or even control how people will act and react to communication.

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A dirty secret about marketing is that our game is almost entirely theoretical.Predicting what a consumer will decide, let alone why, is an exercise in futility — but building brand is an attempt to game the system.

Branding alone can convince a consumer to act irrationally. A Porsche and a Nissan both get you from Point A to Point B. Yet the Porsche not only satisfies a practical need, but also fulfills a deeper emotional desire: status. Sure, there are rational reasons to pick a 911 Targa 4 GTS (it’s faster, it retains value better, it might distract people from your thinning hairline) but no one buys a car like this because it “makes sense.”

Moreover, no matter which vehicle you choose, you’ll still need insurance — and every insurance company is essentially exactly the same. For Geico, Aflac, and Liberty, the name of the game is mindshare, awareness, and brand recall. They theorize that enough geckos and ducks and emus will convince a customer to pick their coverage over that of a competitor. Flo from Progressive and Jake from State Farm are trying to sell you an identical product, and yet your perfectly rational need for insurance will be overwhelmed by your emotional attachment to Dennis Haysbert’s smooth, soothing baritone. Game over: You got Allstate.

Game Theory itself is the noble pursuit of the Holy Grail of consumer insight: What if we could figure out not just what people will decide, but why? When we Game, we attempt to quantify the unquantifiable and codify the qualitative. To model the brain as a computer while acknowledging the mind is a mess.

So welcome to the topic of this month’s CODEX: the theory of games, and gaming out theory.

🍺 KottabosPassatellaAutomatons Drinking games from Greece, Italy, and Germany, respectively.

🎥 King of KongWordplayWord Wars → Documentaries about three different types of games (Donkey Kong, Crosswords, and Scrabble) and the folks who take them very, very seriously.

🍔 McMillion$ Perfect BidPress Your Luck → Documentaries about three different types of gamers successfully gaming the system, and only sometimes fraudulently!

🖤 Walter White Tom RipleyRichard III → Three fictional characters who masterfully gamed those around them… up until the very end.

🎲 The MIT Blackjack TeamRasputinSam Bankman-Fried → Three real characters who masterfully gamed those around them… up until the very end.

💰 CoinbaseStarbucksThe New York Times → Three brands that turned to gamification with great success.

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A commonplace book is a hodgepodge of secret knowledge, new ideas, old quotations, and odd observations compiled for future reference and reflection.

  • Video and Mobile Games ​​Are a 4-Billion-Person-Big Opportunity: Think video games are just for little boys? You’re right. But lots of other people play them too.Gaming is following the paths of other mass media to become a commoditized form of communication for men, women, the old, the young, and everyone in between.

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  • It’s BurgerTime!: Fast-casual favorite (OK, maybe it’s just an airport favorite) Chili’s has collaborated with an unlikely partner - the 1982 Japanese arcade classic BurgerTime - to let consumers physically attack the fast food competition in the wake of frustrations over $18 Big Mac meals.

  • Going Postal: Founded in 1896, the Sperry & Hutchinson Company provided signature “Green Stamps” to retailers that they could give away for free in exchange for spending a certain amount of money, essentially inventing the first mainstream gamified retail loyalty program. The prizes created a craze that reached its peak in the 1960s, when the S&H Company made more stamps than the U.S. Postal Service. Brands like Piggly Wiggly, Gold Bond, A&P, Safeway, and more soon copied this model. Although far less popular these days, don’t write off stamps as an investment class just yet.

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  • Monte Carlo Simulations: Prediction models used to assess the probability of outcomes when the potential for random variables is present – applies to everything from finance to biology to Battleship.

  • The Monty Hall Problem: Three doors, one prize. You pick Door #2 and the host opens Door #1, revealing a goat. The prize remains hidden, and the question is: Do you stick with Door #2 or change your selection? The math says change your selection, but only 12% of people do.

  • Monty Python’s Complete Waste of Time: Was the real name of a real computer game created with the famed British comedy troupe’s IP. Despite their glorious heritage, this and other Monty Python video games were not so funny.

  • Life’s A Sport, #MAKEITCOUNT: No product attempted to gamify our lives more audaciously than Nike’s much-maligned FuelBand. Despite its many, many flaws, the product ecosystem was ahead of its time and they made some hits while it lasted, including a wonderful launch campaign and a mascot we’re still obsessed with: Fuelie.

  • Take Three Hours of Mario Kart and Call Me in the Morning: We know gamification is useful for brands, and indeed can boost retention, but are video games actually good for you? Research is consistently showing that, in moderation, games can assist in cognitive function development for children and have mental health benefits for adults. Nice.

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  • Picture This: A local pizzeria in Atlanta found a way to game human decision-making with a promotion: A man carries a QR code around town that you can scan to redeem free pizza. The catch? Well, you have to literally, physically catch him first. Executed in 2022, the lively video is recirculating on social media recently. What’s the real promotion here: a chance for free pizza, or the consequence-free opportunity to chase a stranger in the middle of your workday?

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-Evan Scott Schwartz, Partner & Head of Content @ Kingsland

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The most common criticism of baseball is that it is old and boring. But a true fan considers the leisurely pace and archaic traditions as part of the game’s old-timey charm — a steadfast sport whose poetry lies in its predictability. In the context of our modern world, however, where disruption drives engagement and predictability is pejorative, the game has never looked grayer.

Over the past two decades, however, baseball has embraced technology just as doggedly as marketers, and in pursuit of the same basic breakthrough: how to use data to predict human behavior. For both industries, it is Game Theory writ large — an attempt to calculate how people will act and what they will decide as unwitting pieces on the proverbial board or literal ballfield.

The theory of marketing is that the right combination of data, analytics, and communication can drive consumer decisions in specific directions and convince anyone to buy anything. Game Theory pushes it a step further, presupposing that behavior can be calculated based solely on the rules of engagement and the rationality of people. The one hiccup, of course, is the behavior of humans.

Demographics, psychographics, and customer profiles be damned, people are not the sum of their numbers — except when they are. And moldy old baseball, the most boring and predictable of sports, is in the midst of a data-driven revolution that leverages innovation to embrace the predictability of the very real humans wearing the uniforms.

“Hit ‘Em Where They Ain’t”

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For a century, that was the unified theory of baseball: one batter trying to manipulate a ball racing toward him and put it somewhere in the field of play without a fielder nearby. “Hit ‘em where they ain’t” sounds simple enough, especially for a sport often denigrated for its relative lack of athleticism and relative surfeit of standing around.

But despite appearances, baseball is by far the hardest game on earth because the act of hitting a baseball is the single-most difficult skill in all of athletics. A hitter who succeeds just three out of every ten times is an All-Star — any better and you’re in the Hall of Fame like Ted Williams, who was not only the greatest hitter who ever lived, but the greatest philosopher of hitting in baseball history. Baseball involves a lot of different and difficult athletic skills, but according to Williams, “the hardest thing to do in baseball is to hit a round baseball with a round bat, squarely.”

For the last 150 years, even the best players in baseball have only managed to solve the geometry about three out of ten times —and the average ballplayer fails more than 75% of the time. Heck, even Ted Williams and his sparkling career .344 batting average failed at his job nearly 67% of the time he showed up at work. Imagine if football kickers missed seven out of every ten kicks, or a soccer goalie let seven out of every ten shots go in the goal.

The issue is that there are oh-so-many different ways for a hitter to fail: even when he manages to get the bat on the ball, the data favors that ball ending up in a fielder’s glove as an out. An everyday position player plays about 162 games per season, logs 700+ at-bats over those games, and sees roughly 3-5 pitches per at-bat, leading to thousands of distinct data points in a single year that can be used to not only measure past performance, but theoretically predict future performance.

Baseball teams now employ entire armies of data analysts tasked with using computers to harness those probabilities and engineer the perfect algorithm for World Series wins. Honest-to-goodness Game Theory for a game that has spent over a century remaining delightfully, romantically stuck in the past, and is now experiencing a full-on technological revolution.

Predicting The Pastime

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The “Moneyball” revolution in the early 2000s flooded baseball front offices with young, Ivy League-educated economists, all looking to take the predictive models and data analytics they used to predict financial markets and turn them into tools for building the ideal baseball team. Their first task was to figure out a method for not only quantifying player performance, but predicting it.

That led to the first modeling problem: how to predict what happens once the ball touches the bat. The traditional baseball box score records the result of each at-bat, but leaves too much unsaid: if Player A hits a lazy pop fly to right field, and Player B crushes a sure home run that the right fielder catches just over the outfield wall, both results go in the scorecard as “F9” — despite Player B’s behavior clearly auguring better results in the future.

So the whiz-kid analysts made a choice to remove all the variables from an at-bat, and focus on the core matchup: Pitcher vs. Batter.

In each at-bat, there are three possible outcomes that involve the pitcher, the batter, and no other player on the field: a strikeout, a walk, and a home run. After a century of baseball wisdom based around “hit it where they ain’t,” the analysts reduced the game to the three most measurable results: strikeout, walk, home run. The “Three True Outcomes.” And few players have embodied this extreme interpretation of hitting prowess like the inimitable Adam Dunn.

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Three And Dunn

Standing 6’6” tall and weighing 285 pounds, Adam Dunn always looked more like a football player than a first baseman — and as a native of Texas, where football is religion, it is no wonder that Dunn’s earliest athletic promise was on the gridiron, not the diamond. After high school, Dunn committed to play quarterback for the powerhouse University of Texas Longhorns, but after being asked to change positions, Dunn decided to change sports entirely and head to the dugout, where his massive frame and “country strong” swing made him a formidable power hitter. That is, of course, when he actually made contact with the ball — a lifelong struggle for the slugger known as “The Big Donkey.”

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Whereas Dunn’s size was a positive for football, his lumbering frame was ill-suited for essential baseball skills like running the bases or fielding the ball, rendering him a limited player at best. So the burly, beefy first baseman embraced his true nature and simplified his approach at the plate: swing hard, swing often, miss even more often, and ignore everything else.

For stodgy old baseball, this strategy was practically counterculture: hits are king, and making contact with the ball increases your odds of hitting that ball where someone ain’t. Conversely, strikeouts were the worst possible outcome, since not putting the ball in play at all meant no chance of getting on base. Walks were tolerated — within the rules of the game, yet somehow against the spirit. The old-timers figured the only thing more boring than swinging and missing three times is NOT swinging FOUR times, yet still being rewarded with a spot on first base.

Hitting .300 was the goal, and in order to succeed 30% of the time, players would swing for singles rather than try to crush the ball and risk missing it entirely. By contrast, Adam Dunn’s success rate at the plate was decidedly lower — his career batting average is a measly .237, meaning only 23.7% of his at-bats ended in a hit. Even worse, Dunn struck out an unsightly 28.6% of the time he stepped in the box, and his 2,379 career strikeouts are third all-time, an ignominious honor to be sure.

But around the time that Moneyball became the new baseball wisdom, teams realized the point of the game isn’t to get hits — it’s to get on base, by any means necessary. So while Dunn struggled to get hits, he had a true talent for making pitchers miss the strike zone, earning walks at a robust rate of 15.8% — even ten years after retiring, Dunn still ranks 44th all-time in career walks. So while Dunn only manage a hit in 23.7% of his turns, his career .364 on-base percentage meant he still made it to first base 36.4% of the time — even better than a .300 hitter.

Moreover,when Dunn DID make contact with the ball, the ball went far. Dunn finished his career with a whopping 462 total homers, good for 38th all-time, and his career “At-Bats Per Home Run” rate is a blistering 14.9 — meaning Dunn cracked a tater about once every 15 times he came to the plate. For context, that’s the 18th-highest rate of all time — every time Dunn stood in the batter’s box, he was more likely to hit a homer than legends like Mickey Mantle, Jimmie Foxx, Alex Rodriguez, and Ken Griffey Jr.

And while the raw power numbers are impressive, Dunn’s metronomic consistency is what made him so special. Throwing out an injury-plagued 2011 as an outlier, and from his Age 24 season to Age 32, Dunn’s season home run totals were as follows: 46, 40, 40, 40, 40, 38, 38, and 41.

If the “Three True Outcomes” are the most predictable parts of hitting, Dunn is the Holy Trinity. Over his 14-year career, Dunn stepped to the plate 8,328 times, and either struck out, walked, or homered an astounding 49.9% of the time. That’s a slugger you can set your watch to, or slot into your lineup card each season with considerable confidence, or put into an algorithm to easily quantify his statistical and monetary value.

The baseball quants used decades of data and myriad formulas to determine exactly what you need from your nine everyday hitters in order to score more runs than your opponent, doing everything they could to eliminate the human element under a mountain of spreadsheets and algorithms — and their ideal player looks a lot like Adam Dunn. In fact, a lot of current ballplayers look like him too, statistically if not physically. And If marketers are honest, our ideal customer looks a lot like Adam Dunn, too.

Old Reliable

You probably have an Adam Dunn or two in your life. Not a gigantic baseball-bashing machine, but someone whose behavior you can predict with the accuracy of an atomic clock. In fact, you probably love your Adam Dunns, because reliability is a virtue as a character trait.

According to a recent study published in the Journal of Social and Personal Relationships, people cite reliability as an essential quality in a friend, along with loyalty and honesty — all synonyms for predictability. When things are predictable, we learn to expect the same outcome, and that allows us to build a sense of trust — the bedrock of any solid and healthy relationship. After all, what else is trust but a belief in the reliability of someone or something, from a friend to a sushi restaurant to, yes, a brand.

We want people and brands in our lives that we can depend on to behave in consistent ways, because that consistency makes us feel safer. Your erratic friends may be more fun in a chaotic way, but when it comes to watching your kid, or your dog, or even your houseplant, Adam Dunn is getting the call. And he always answers.

Erratic and unpredictable brands suffer from lack of trust, which leads to lack of sales. The Supreme Court says corporations are people, after all, and brands are their personalities: the personification of that company’s values and ethos, communicated through words and actions.

We often talk to clients about the concept of “brand as moat” — the idea that a strong, well-defined, and consistent brand can act as a barrier against criticism, like a defensive ring around a castle. Brand can also be a buttress for behaving in new or unexpected ways, provided there is a track record of trust. Think about it this way: if Apple and Tesla both decided to open up sushi restaurants, who do you trust more to prepare the blowfish? Probably not the one that keeps slicing off people’s fingers.

The main difference between a human being and a brand — besides the corporeal form — is that human behavior is inherently unpredictable, even (especially?) to the conscious mind inside that particular human being. But brand brains are run by committee, meaning there are more hands on the wheel and presumably less chance the vehicle will veer off the road, until someone shifts gears to D for “Disruption” and ends up in a ditch. When brands act like people, they get unpredictable, which ironically turns real people off. Sure, sometimes a nice zig can build positive buzz — but sometimes a zag will trigger the kind of buzz you hear in nature, i.e. a swarm of angry bees.

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Speaking of buzz, ‘authenticity’ is a buzzword that tends to drive brands to act like anything other than what they truly are, clearly having learned nothing from children’s programming telling kids to be themselves. This out-of-character behavior is usually a misguided attempt to game consumers into positive affinity, and it rarely succeeds. Rather than trying to be something they are not, brands should take a cue from Adam Dunn and embrace their truest identity.

The Three True Outcomes for brand behavior are the three tenets of good communication: Consistency, Frequency, and Quality. Be consistent in how you speak, make sure you do it a lot, and make sure it’s always good.

Consistency is basically personality: no one wants to invite the wild card to their party. Frequency is about building trust: showing repeatedly that you are the same person every time you show up, and showing up in the places where you are expected to be. Quality is self-explanatory: if you show up the same way where you are expected and actually bring something good and valuable to the table, people will give you the leeway to appear in unexpected places and act in surprising ways.

The campaigns and comms that fall flat tend to break these three tenets, usually based on data and analytics that claim to be able to predict human behavior yet completely misjudge human reactions. Trying to read people’s minds is an impossible task, and trying to predict behavior can lead to getting so in the weeds that you start to become disoriented and intoxicated by the spirit of marketing. Stop trying to control what you can’t and instead follow the advice of legendary hitter (and legendary drunk) Hack Wilson: “When I see three balls, I just swing at the one in the middle.”

  • Static print and OOH can be gamified too. Just take Tommy Hilfiger’s iconic billboard upon the launch of his eponymous brand (cooked up by none other than George Lois, of course) as an example:

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  • We’ve unironically loved Dogs Playing Poker as a society for over 100 years now, but did you know that it’s also an ad? Originally painted by Cassius Marcellus Coolidge in 1894, Brown & Bigelow commissioned a series of 16 more oil paintings in 1903 to advertise cigars. In total, 18 paintings in the overall series feature anthropomorphized dogs, but the 11 in which dogs are seated around a card table have become well-known in the United States as examples of beloved kitsch.

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  • Brands like Duolingo, Oatly, and Liquid Death get a lot of love for being slightly unhinged, but they pale in comparison to the off-the-rails video game marketing of yesteryear. As part of the great Console Wars of the 1990s and early-aughts, Nintendo, Playstation, and SEGA vied for attention, eyeballs, and cool-factor with some wonderfully bizarre and off-color campaigns aimed squarely at teenage boys.

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  • Games themselves can be a wonderful source of design inspiration. For example, you can turn to UR, originating around 4,600 years ago in ancient Mesopotamia; the mysterious 12th Century Lewis Chessman; or The Royal and Entertaining Game of the Goose, first gifted by Duke Francesco de Medici to Philip II of Spain between 1574 and 1587, and later tremendously popular in the British royal courts.

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  • A more modern design we love is the bird-watching companion’s board game, Wingspan. The (fairly complex) strategy game boasts over 170 unique, gorgeous watercolor illustrations hand-drawn by artists Ana Maria Martinez Jaramillo, Natalia Rojas, and Beth Sobel.

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  • Charli XCX’s BRAT rollout was a masterclass in brand-led marketing and knowing your customer (and in her case, their desire to dupe her system immediately into a never-ending cycle of fan merch and memery). But is Taylor Swift gaming her competition to stay at the top of the charts? Anyway, here’s a look at the already-viral campaign’s lo-res ecosystem.

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Looking to learn more about games, theory, or game theory? We’ve got you covered.

  • Cain’s Jawbone - Potentially the original “choose your own adventure” game, this murder mystery was first published in 1934 as part of The Torquemada Puzzle Book. It remained largely unsolved for decades (although two people – Mr. S. Sydney-Turner and Mr. W. S. Kennedy – supposedly beat the puzzle in 1935 and won £25 each) until the COVID-19 pandemic, when it became a hit for the first time in 85 years. A sequel is now even in the works.

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  • Theory of Games and Economic Behavior - If you’re a real nerd, start with the seminal text on Game Theory by Oskar Morgenstern and John Von Neumann.

  • The Anxious Generation - Famous social media crank Jonathan Haidt’s latest incendiary cultural criticism makes it clear how dangerous a phone-based childhood can be for our mental health and offers a fairly simple solution: unstructured time playing games, ideally outdoors.

    • Some have complained about the grab bag of studies cited by Haidt in his newest tome. Here’s a thoughtful analysis from one of our favorite Substacks, Brown Professor Jacqueline Nesi’s Techno Sapiens.

    • Despite the controversy, few people disagree that playing together outside is good for kids.

    • That may be part of why school districts around the country are beginning to ban cell phones during the school day, including the City of Los Angeles.

  • Liar’s Poker - Okay, this isn’t actually about poker. But it is about how Wall Street and the ultra-rich turned our economy into one big game that only they can play. Spoiler Alert: they’re not great at it.

  • Tomorrow and Tomorrow and Tomorrow – Gabrielle Zevin’s fifth novel won the 2022 Goodreads Choice Award for Best Fiction, and focuses on the rarely-explored world of video game design.

  • CYCLOPS -ArtistTrevor Paglen calls his latest piece “a networked performance, collaborative narrative, and alternate-reality-game designed to be played by groups of people working together across the word.” It’s difficult, creepy, and chock-full of secret features, including new works of art that can only be discovered by playing. Cyclops continues Paglen’s tradition oftackling government conspiracy, mass surveillance, and data collection in fresh, fascinating new ways.

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Reverberations and recriminations from the ghost of CODEX past… 001: IN A NAME.

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CODEX 002: Game Theory (2024)

FAQs

Is game theory real math? ›

Game theory is a mathematical concept that aims to predict outcomes and solutions to an issue in which parties with conflicting, overlapping or mixed interests interact.

What is a CODEX game? ›

Codex is a customizable card game themed after real-time strategy games such as WarCraft 3 and StarCraft. You build your deck as you play from a pool of cards in your "codex".

What is the game of incomplete information game theory? ›

A common way to model incomplete information games is to use Bayesian games, which are games where players have beliefs about the unknown aspects of the game, such as the types or actions of other players. These beliefs are represented by probability distributions that reflect the players' subjective expectations.

Is game theory flawed? ›

A constant difficulty with game theory modeling is defining, limiting, isolating or accounting for every set of factors and variables that influence strategy and outcome. There's always an X-factor that simply cannot be accounted for.

What are the criticism of game theory? ›

Critics argue that game theory is too abstract, assumes that all players are rational and self-interested, and is too focused on competition. However, despite these criticisms, game theory remains an important tool for understanding and analyzing a wide range of economic and social phenomena.

Is codex still cracking? ›

On February 23, 2022, CODEX announced its retirement in its cracked release of The Sims 4: My Wedding Stories. The group cited the lack of competition in the cracking scene as a sign that CODEX had accomplished its founding goal in 2014, which was to compete with RELOADED, "the dominating PC games group at the time."

Why is codex shutting down? ›

The group had cracked some of the most challenging games, and perhaps they felt that there was nothing left for them to prove. It is also possible that CODEX had simply lost interest in cracking games. People's interests change over time, and it is possible that the group had simply moved on to other things.

Why is codex called codex? ›

The word codex comes from the Latin word caudex, meaning "trunk of a tree", "block of wood" or "book". The codex began to replace the scroll almost as soon as it was invented, although new finds add three centuries to its history (see below).

What is the paradox in game theory? ›

Parrondo's paradox, a paradox in game theory, has been described as: A combination of losing strategies becomes a winning strategy. It is named after its creator, Juan Parrondo, who discovered the paradox in 1996.

Is game theory still being used? ›

Game theory has a wide range of applications, including psychology, evolutionary biology, war, politics, economics, and business. Despite its many advances, game theory is still a young and developing science.

What is the zero game theory? ›

In combinatorial game theory, the zero game is the game where neither player has any legal options. Therefore, under the normal play convention, the first player automatically loses, and it is a second-player win.

Is game theory pure or applied math? ›

game theory, branch of applied mathematics that provides tools for analyzing situations in which parties, called players, make decisions that are interdependent. This interdependence causes each player to consider the other player's possible decisions, or strategies, in formulating strategy.

Is game theory actually used? ›

Game theory tries to explain the strategic actions of two or more players in a given situation with set rules and outcomes. While used in several disciplines, game theory is most notably used in the study of business and economics.

Is game theory math or psychology? ›

As a method of applied mathematics, game theory has been used to study a wide variety of human and animal behaviors. It was initially developed in economics to understand a large collection of economic behaviors, including behaviors of firms, markets, and consumers.

How effective is game theory? ›

Game theory is a type of role-playing that can be used to develop an understanding of one's own motivations, and those of others. More importantly, it can help fine-tune a person's skills at negotiating for mutually beneficial results. Such skills are useful whether in an adversarial, business, or personal setting.

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