Game theory is a mathematical theory of strategy which assumes that there are at least two players whose choices determine an outcome. Insofar as the players have conflicting preferences, their conflict may not be total — it is not necessarily the case that what one player wins the other loses
(as in most sports). Their conflict may only be partial, wherein both players can win or lose simultaneously. Game theory focuses on players’ strategies that are in equilibrium, i.e. stable.
Game theory was largely invented by John von Neumann, a Hungarian mathematician who came to the United States in the late 1930s, and Oskar Morgenstern, a German economist, who came about that time. They met at the Institute for Advanced Study at Princeton University around 1940 and wrote the book Theory of Games and Economic Behavior (1944). The book was revised in 1947 and
1953.
John von Neumann had earlier written an article (in 1928), proving the so-called minimax theorem, which is sometimes considered the fundamental theorem of game theory. At Princeton, he collaborated with Morgenstern on applying game theory to economics as well as to parlor games, like poker that people play.
In their book, the authors model a simplified form of poker and analyze optimal strategies that players choose. Their book is mathematically challenging, and it was not well-understood at the time. But over the years many people have found the ideas very fruitful, particularly in economics, biology, and, more recently, political science. Furthermore, game theory has been applied to sports

and a variety of disciplines, such as philosophy. Game theory gives a structure to thinking about both conflict and cooperation when there are two or more players.
There have been several major contributors to the development of game theory, including John
Nash, who is famous for the Nash equilibrium, and a number of mathematicians and economists who received the Nobel prize in economics for their contributions.
A game is a situation in which there is interdependence between the participants or players. If there are two players, what you do depends on what I do, and what I do depends on what you do, so the outcome depends on both of our choices. But there may be more than two players, which is likely to lead to the formation of coalitions.
People choose strategies on the basis of the outcomes they yield. If you choose a strategy that you think is good for you, and I choose a strategy that I think is good for me, and neither of us can do better by departing from these strategies. It is called an equilibrium outcome.

Economist Eric Maskin on privatization of the radio spectrum, history of the field, and mistakes in decision making
This is one kind of solution to games. But game theory is not just about choosing optimal strategies but also about allocating value. Value might be money, but it could include other things players desire, and the question is how to distribute it. So the question of fairness often comes up in game theory. What distribution of goods is fair to everybody? It is usually some kind of a compromise, whereby all players are satisfied to the extent possible. This is the part of game theory called cooperative game theory. The noncooperative part of game theory is more related to choosing better and worse strategies.
John Nash made this distinction between the two different approaches to game theory in his early articles around 1950. He was a fundamental contributor to the development of the theory. In the last half century, it is the noncooperative game theory that has been most fully developed, with the search for optimal, stable strategies that lead to equilibrium outcomes. But the cooperative game theory is also of interest, particularly to philosophers who are concerned with justice and the fairness of outcomes.
A Nash equilibrium is defined as an outcome such that if there are two players, neither player would wish to depart from it because he or she would worse by doing so. But it is not necessarily a good outcome for the players. There is a famous game called Prisoners’ Dilemma, in which, when both players choose their optimal strategies, the resulting outcome is quite poor. There is a better

outcome for both players, but it is not stable and so is not a Nash equilibrium. Therefore, there is a conflict between choosing optimal strategies and obtaining a good outcome.
The story told about Prisoners’ Dilemma is the following: Two prisoners who are held in separate cells; each is asked whether he is guilty or not guilty of a particular crime. If they both admit they are guilty, they receive a reasonably harsh prison sentence—say, five years in prison. But if they both refuse to admit that they are guilty, they both do quite well, receiving only a one-year prison sentence. But if one confesses and the other does not, then that is very bad for the one who confesses (e.g., ten years in prison), because now he is found guilty, while the other one goes free
(e.g., no prison), for helping to convict the other player.