Founded by John von Neumann and Oskar Morgenstern (Theory of Games and Economic Behavior, 1944), with John F. Nash Jr.'s equilibrium (Equilibrium Points in N-Person Games, 1950) and Thomas C. Schelling's The Strategy of Conflict (1960).
Lays out a strategic situation as players, the moves open to each, and their payoffs, then finds the stable outcomes and asks whether the game itself could be changed.
When to reach for it
When the result depends on what several parties choose and each is reacting to the others, as in negotiations, pricing, or incentive design.
How it runs
- Name the specific players, not abstractions like the market.
- List the moves each player can really make, including exit.
- Rank each player's payoffs for each combination of moves.
- Classify the game: one-shot or repeated, simultaneous or sequential.
- Find the stable outcomes, then ask which rule change improves them.
Where it sits in SOLVE eX
Go to the source
- Theory of Games and Economic Behavior, 1944
- Equilibrium Points in N-Person Games, Proceedings of the National Academy of Sciences, 1950
- The Strategy of Conflict, 1960