when there is a direct conflict between multiple parties striving for the same outcome it is often called a zero sum game this means that for every winner there is a loser alternatively it means that the collective net benefit received is equal to the collective net benefit lost lots of sporting events are a zero sum game as one team wins and another team loses 
a non zero sum game is one in which all participants can win or lose at the same time consider business partnerships that are mutually beneficial and foster value for both entities instead of competing and attempting to win at the expense of the other both parties benefit investing and trading stocks is sometimes considered a zero sum game after all one market participant buys a stock and another participant sells that same stock for the same price however because different investors have different risk appetites and investing goals it may be mutually beneficial for both parties to transact simultaneous move situations which occur frequently in life mean each participant must continually make decisions at the same time that their opponent is making decisions as companies devise their marketing product development and operational plans competing companies are doing the same thing at the same time in some cases there is an intentional staggering of decision making steps enabling one party to see the other party s moves before making their own this is usually present in negotiations one party lists their demands then the other party has a designated amount of time to respond and list their own game theory can begin and end in a single instance like much of life the underlying competition starts progresses ends and cannot be redone this is often the case with equity traders who must wisely choose their entry point and exit point as their decision may not easily be undone or retried on the other hand some repeated games continue on and seemingly never end these types of games often contain the same participants each time and each party has the knowledge of what occurred previously for example consider rival companies trying to price their goods whenever one makes a price adjustment so may the other this circular competition repeats itself across product cycles or sale seasonality in the example below a depiction of the prisoner s dilemma discussed in the next section is shown in this depiction after the first iteration occurs there is no payoff instead a second iteration of the game occurs bringing with it a new set of outcomes not possible under one shot games internet encyclopedia of philosophyexamples of game theorythere are several games or situations that game theory analyzes here are a few the prisoner s dilemma is the most well known example of game theory consider the example of two criminals arrested for a crime prosecutors have no hard evidence to convict them however to gain a confession officials remove the prisoners from their solitary cells and question each one in separate chambers neither prisoner has the means to communicate with the other officials present four deals often displayed as a 2 x 2 box the most favorable strategy is to not confess however neither is aware of the other s strategy and without certainty that one will not confess both will likely confess and receive a three year prison sentence the nash equilibrium suggests that in a prisoner s dilemma both players will make the move that is best for them individually but worse for them collectively 7 tit for tat is said to be the optimal strategy in a prisoner s dilemma tit for tat was introduced by anatol rapoport who developed a strategy in which each participant in an iterated prisoner s dilemma follows a course of action consistent with their opponent s previous turn for example if provoked a player subsequently responds with retaliation if unprovoked the player cooperates 89the image below depicts the dilemma where the choice of the participant in the column and the choice of the participant in the row may clash for example both parties may receive the most favorable outcome if both choose row column 1 however each faces the risk of strong adverse outcomes should the other party not choose the same outcome internet encyclopedia of philosophythis is a simple game in which player a must decide how to split a cash prize with player b who has no input into player a s decision while this is not a game theory strategy per se it does provide some interesting insights into people s behavior experiments reveal about 50 keep all the money to themselves 5 split it equally and the other 45 give the other participant a smaller share 10the dictator game is closely related to the ultimatum game in which player a is given a set amount of money part of which has to be given to player b who can accept or reject the amount given the catch is if the second player rejects the amount offered both a and b get nothing the dictator and ultimatum games hold important lessons for charitable giving and philanthropy 11in a volunteer s dilemma someone has to undertake a chore or job for the common good the worst possible outcome is realized if nobody volunteers 12 for example consider a company in which accounting fraud is rampant though top management is unaware of it some junior employees in the accounting department are aware of the fraud but hesitate to tell top management because it would result in the employees involved in the fraud being fired and most likely prosecuted being labeled as a whistleblower may also have some repercussions down the line but if nobody volunteers the large scale fraud may result in the company s eventual bankruptcy and the loss of everyone s jobs the centipede game is an extensive form game in which two players alternately get a chance to take the larger share of a slowly increasing money stash it is arranged so that if a player passes the stash to their opponent who then takes it the player receives a smaller amount than if they had taken the pot the centipede game concludes as soon as a player takes the stash with that player getting the larger portion and the other player getting the smaller portion the game has a pre defined total number of rounds which are known to each player in advance 13game theory exists in almost every facet of life because the decisions of other people around you impact your day game theory pertains to personal relationships shopping habits media intake and hobbies types of game theory strategiesgame theory participants can decide between a few primary ways to play their game in general each participant must decide what level of risk they are willing to take and how far they are willing to go to pursue the best possible outcome a maximax strategy involves no hedging the participant is either all in or all out they ll either win big or face the worst consequence consider a new start up company introducing new products to the market its new products may result in the company s market cap increasing fifty fold on the other hand a failed product launch will leave the company bankrupt the participant is willing to take a chance on achieving the best outcome even if the worst outcome is possible a maximin strategy in game theory results in the participant choosing the best of the worst payoff the participant has decided to hedge risk and sacrifice full benefit in exchange for avoiding the worst outcome often companies face and accept this strategy when considering lawsuits by settling out of court and avoiding a public trial companies agree to an adverse outcome however that outcome could have been worse if the case had gone to trial in a dominant strategy a participant performs actions that are the best outcome for the play irrespective of what other participants decide to do in business this may be a situation where a company decides to scale and expand to a new market regardless of whether a competing company has decided to move into the market as well in prisoner s dilemma the dominant strategy would be to confess pure strategy entails the least amount of strategic decision making as pure strategy is simply a defined choice that is made regardless of external forces or actions of others consider a game of rock paper scissors in which one participant decides to throw the same shape with each trial as the outcome for this participant is well defined in advance outcomes are either a specific shape or not that specific shape the strategy is defined as pure a mixed strategy may seem like random chance but there is much thought that must go into devising a plan of mixing elements or actions consider the relationship between a baseball pitcher and batter the pitcher cannot throw the same pitch each time otherwise the batter could predict what would come next instead the pitcher must mix their strategy from pitch to pitch to create a sense of unpredictability that they hope to benefit from limitations of game theorythe biggest issue with game theory is that like most other economic models it relies on the assumption that people are rational actors who are self interested and utility maximizing of course we are social beings who do cooperate often at our own expense game theory cannot account for the fact that in some situations we may fall into a nash equilibrium and other times not depending on the social context and who the players are in addition game theory often struggles to factor in human elements such as loyalty honesty or empathy though statistical and mathematical computations can dictate what a best course of action should be humans may not take this course due to incalculable and complex scenarios of self sacrifice or manipulation game theory may analyze a set of behaviors but it cannot truly forecast the human element 