# Essay on The Theory Of Game Theory

Originally the theory of games was developed to look at games, applying to games such as chess, checkers, and tic-tac-toe (Owen, 2013). Game theory has not become a standard language in economics and other social sciences but this branch of study was original developed in 1944 by John von Neumann and Oskar Morgenstern. It wasn’t until a few years later that a solution was proposed as to how rationale players would interact. John Nash proposed that players would adjusted their strategies until no player could benefit from changing and reach what has been coined the “Nash Equilibrium.” The equilibrium will leave the players at their best possible response to all other players responses (Camerer, 2003; University of Western Ontario, 1998). The popularity of game theory continued to grow with each passing year, at the 1990 World Congress of the Econometric Society over 500 papers submitted had some connection to game theory (Munro, 1992).

“Game theory is a bag of analytical tools designed to help us understand the phenomena that we observe when decision-makers interact.” This theory helps to work out how events will unfold as people and organizations interact in a manner which they perceive as their best interest based upon the players involved, their potential strategies, the order of moves, and the payoffs for each strategy combination (The Economist, 2011; Camerer, 2003; Hausman, 2005; University of Western Ontario, 1998). Game theory is often…