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1. Game theory is the study of cooperative and non-cooperative approaches to games and social situations
in which participants must choose between individual benefits and collective benefits. The games or
hypothetical situations involve scenarios where participants must make decisions that affect not only
the individual participants but also all the other participants as well.
Most game theory models involve the following five conditions:
1. Each decision maker has two or more choices or sequences of choices ("plays").
2. All possible combinations of decisions or plays result in a clear outcome: win or lose.
3. The scenarios have a well-defined outcome and decision makers receive a "payoff (the value of
the outcome to the participants). That is, participants will gain or lose something depending on
the outcome.
4. The decision makers know the rules of the game as well as the payoffs of the other decision
makers.
5. The decision makers are rational: when faced with two alternatives, players will choose the
option that provides the greatest benefits.