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Reinventing Game Theory 101

April 11 admin

I have been diving deeper into game theory lately as I have been putting quite a bit of time into studying poker strategies, social game market analytics and gaming player behaviors. I will do a dedicated post soon about social game player behaviors and traits, but today I will stick to game theory 101 and the reinvention of gaming.

What is Game Theory?

For those of you that don’t know what game theory is, in simplest terms, game theory is the strategic decision making based on two or more rational players in a game situation where one’s choice(s) depends upon the choice of the other.

Player Tendencies: How Players Play

In many cases, beginning players of decision based games such as poker or chess, may not consider the actions of their opponents before making a ‘move’, and therefore will result in playing a sub-optimal strategy. More advanced and intermediate ‘players’ however will adapt and make informed decisions by using the known data around them.

Game theory forces the consideration of a range of opposing responses including:

  • Actions/choices available
  • All known information (past history,current behavior, cohort analysis, analytics)
  • All unknown information (variables)
  • Situation based strategy (position, strengths, weaknesses)
  • Possible outcomes
  • Expected values (positive or negative results, rewards) 
These concept can be extended over to other competitive real world scenarios such as politics to product pricing in a retail. (Eg. One lowers prices to get more sales, but backfires because competitors also do the same thing, counterfeiting efforts).

Next Level Thinking

Because game theory assumes that one has opponents who are adjusting their strategies according to ‘what everyone else (including you) is doing’, the exact level of opponent sophistication should be an intregal part of one’s own game strategy. The secret is to not out level (outplay) yourself because if both players are ‘strong’ the result may be an infinite regression of ‘i know that you know that i know…‘. The way to ‘win’ out of this level war is to find the sweet spot and that means to think not 5 steps ahead of your opponent but rather just 1 step ahead. Game theory is what provides you with the right the tools to analyze these situations so that you can come out on top.

A common poker term known as ‘leveling’ as explained by poker pro Vanessa Rousso.

I love how game theory teaches how to ‘think’ and how having a strategy is not the same as having a winning strategy.

To use game theory in your everyday decision making can be a major advantage to your end results and bottom line. Whenever you are facing a problem that needs solving, remember what game theory teaches us: Formulate a strategy by covering all possible scenarios and outcomes so that you can make the best winning decision possible. 

Until next time, keep thinking, keep winning…


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