For a sport to be called “gaming”, it has to be played in a setting, with some degree of complexity or challenge, other than what a player would experience when “playing” the game alone. A game isn’t a simple set of rules, necessarily undertaken just for fun or entertainment, and not necessarily used as an education tool. Games are different from work, which usually is done for remuneration; and from literature, which is an expressive expression of cultural or aesthetic ideas. There are many different types of games.
A popular game is Nascar racing. In a typical race, at least two players are seated on either ends of a pit and they race each other from one racetrack to another, trying to beat each other’s time. Game theory tells us that if we can model this in economic models, then we can also get a clear picture of how to allocate resources effectively.
The prisoner’s dilemma is a well-known problem in all economic models. In a typical game, a pair of players are each assigned a prison cell. They each try to escape their cells by performing a certain action, but if they succeed, they are sent back to their cells without any money or possessions. Thus, each tries to outsmart the other, until one player gets to his cage and realizes that all his money, possessions, friends, and loved ones are now in danger of being seized by the prison warden. The prisoner has to decide how to act within a set period of time, making use of various Prisoner Dilemma techniques.
This example underlines the important role played by game theory in all economic settings. In the prisoner’s dilemma, the strategy that best maximizes utility is the most optimal one. This principle is applicable in allocative situations as well. In fact, the balance between punishment and reward, called the prisoner’s dilemma, is an important concept in many different areas including business decision-making, corporate leadership, customer satisfaction, etc.
The balance that emerges from the prisoner’s dilemma is used in other contexts as well. For instance, in the game theory context of sport, it is known that the winner is the team with the most players at the end of the game. In a related context, the winner is always the player with the most money at stake. In both these games, the concept of money is the driving force behind the interaction between individuals. In the prisoner’s dilemma, money is the key to achieve the most utility from the strategy used by a certain player; in the sports context, winning is about acquiring the most prize money.
The prisoner’s dilemma in gaming can be further broken down into two more categories: the symmetrical dilemma and the non-symmetrical dilemma. In the symmetrical dilemma, one player cooperates with every other player; the others do the same. In the non-symmetrical game theory, this opposite is true. In a symmetrical game, there is only one winner; however, in the non-symmetrical game theory, multiple winners are not necessarily bad, provided that they do not coordinate with each other. The non-cooperative game theory also says that punishment and reward have the same meaning in the prisoner’s dilemma as they do in the non-cooperative theory. The punishment for breaking the agreement is the same as the reward for cooperating; the only difference is that a player is not punished for not cooperating with the other players.
The dictator game also follows a similar principle with respect to punishment and reward. In the dictator game, the leader of the group decides the rules. Then, the members of the group receive decrees, or keys, which can be combined into many other keys and form increasingly complicated passwords. The purpose of the leader is to use the keys to control the group; thus, the leader does not need to share his password to control the group.
The prisoner 2 dilemma and the nash equilibrium game can both be solved using the prisoner’s minimization technique, in that both groups must cooperate, or they will be at a loss. However, the nash equilibrium can be solved much easier when people know each other well and play according to the rules. It is very important that people avoid being too similar to each other, otherwise, they will inevitably break the cycle, and cease to cooperate.