Elements of Games

In game theory, games consist of players, strategies, and payoffs. Rationality is an essential element of players, and they need a value system and a set of rules to act in a way that improves their state within their environment. In classical game theory, players are assumed to act according to hyper-rationality, meaning that they consistently act to improve their payoff without making mistakes, have full knowledge of other players’ interactions, and have the capacity to calculate all possible refinements to find the best option. Rationality assumes that all value is reduced to a single homogeneous form known as utility. However, this assumption may not be reasonable in some situations, and the predictions of game theory and observed behavior of real people may differ. Game theory is a relatively young field, and while it has made remarkable advances, the general theory remains incomplete.