♟️ Learning in Public: Game Theory
✨ Learning game theory is like getting a cheat code for understanding how people and organizations make decisions—especially in competitive, strategic, or uncertain situations.
If you prefer to use Notion so you can make a copy and take notes, find my public notion page here.
Generated in ChatGPT // Prompted by Rae Lambert, co-founder of River
Key Points
Game theory reveals the logic behind strategic decision-making in competitive situations
Core concepts include Nash Equilibrium, Prisoner's Dilemma, and strategies (dominant, mixed)
Understanding payoffs and player interactions helps predict outcomes
Games can be zero-sum (winners and losers) or non-zero-sum (mutual benefit possible)
Commitment, credibility, and trust significantly impact game outcomes
Applications span economics, business strategy, politics, and everyday decisions
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Why you should learn Game Theory
Anyone seen the show American Primeval on Netflix? A woman and her son are headed west with a bounty on their head in the late 1800s.
As they seek a guide to help them cross brutal terrain, a bounty hunter closes in. Some locals ask the bounty price. They know where to find the target and will share intel for half of the bounty. Bounty Hunter shows the bounty slip and is immediately killed. Fucking idiot.
Once they have the bounty slip, they don’t need him, and certainly don’t need to split the money. Why wouldn’t he see that coming? Could just be bad writing, or the character just does not understand game theory.
I’ve noticed my husband & co-founder Ryan is much more intuitive with game theory. He quickly thinks several steps ahead from the point of view of our counterparts, which makes him an excellent strategist. It’s come in handy during fundraising for River, building a startup in a heated competitive market, negotiating with juicy stakeholders, and just life in general.
I want to be able to quickly identify scenarios so I can make the best play.
But first, a quick story:
🎓 A Freshman Econ Flex: How I Hijacked the Prisoner’s Dilemma
Freshman year. Intro to Econ. We’d just finished a brutal exam when the professor told us we had a chance to earn bonus points—via a “fun little game.”
Here was the setup (classic game theory bait):
“If everyone writes 10 at the top of their quiz, everyone gets 10 bonus points.”
“But… if anyone writes 20, they get 20—and everyone else gets nothing.”
Ah yes, the Prisoner's Dilemma in the wild.
Before she could even say “Go,” I shot my hand up and asked:
“Can we collude?”
She raised an eyebrow. “I suppose…”
Game on.
I stood up: “Let’s nominate two checkers to verify that everyone writes ‘10’ on their paper.”
The class nodded. Myself and another classmate were nominated.
What happened next?
Every single person wrote 10.
We all got the bonus.
And I had just rug-pulled the professor—live—from a Prisoner's Dilemma into a Stag Hunt.
Because once there’s trust, verification, and mutual risk reduction, defecting isn’t brave—it’s just dumb.
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TL;DR — 10 minutes
Game theory is the study of strategic interaction between decision-makers ("players") where each one's outcome depends not just on their own choices, but also on others'. It's used in economics, politics, business, biology, and more—anywhere choices collide.
Let’s break down the essential terms and ideas:
1. 🎭 The Players
Any individuals, firms, countries, or agents involved in the strategic situation.
2. 🎲 The Game
A situation where each player must choose between different strategies, knowing their payoff depends on everyone’s choices.
Games can be:
Simultaneous (players move at the same time)
Sequential (players take turns)
3. 🧩 Strategies
A complete plan of action for a player. It includes what they’ll do in every possible situation.
Dominant strategy: The best move for a player, no matter what the others do.
Weakly dominant: Sometimes better, never worse.
Mixed strategy: Choosing randomly between options with certain probabilities.
4. 💰 Payoffs
The outcomes or rewards from different combinations of strategies—usually shown in a matrix. Higher numbers = better outcomes for that player.
5. 🔁 Nash Equilibrium
The key concept. A stable state where no player can improve their outcome by unilaterally changing their strategy.
In other words: “I’m doing the best I can, given what you’re doing. You’re doing the best you can, given what I’m doing.”
Games can have zero, one, or multiple Nash equilibria.
6. 🚔 Prisoner’s Dilemma (Classic Example)
Two criminals can stay silent or betray each other.
If both stay silent → mild punishment.
If one betrays and the other stays silent → betrayer goes free.
If both betray → both get a big sentence.
Rational choice leads both to betray (dominant strategy), but mutual silence would’ve been better. This shows how rational self-interest can produce bad group outcomes.
7. 🕊️ Stag Hunt (Trust & Coordination)
Two hunters can go for a stag (high payoff if both cooperate) or hunt rabbits alone (lower but guaranteed payoff). Highlights risk and reward of cooperation.
8. 👁️🗨️ Signaling & Screening
In asymmetric information games:
Signaling: One player (with more info) tries to show their type (e.g., job applicant gets a degree).
Screening: The uninformed player creates a test to reveal info (e.g., insurance companies offering deductibles).
9. 📦 Zero-Sum vs. Non-Zero-Sum Games
Zero-sum: One player’s gain = another’s loss (e.g., chess, poker).
Non-zero-sum: All players can win—or lose—together (e.g., business partnerships).
10. 🔒 Commitment & Credibility
Sometimes the ability to commit to a strategy—especially a threat or promise—can change the game entirely. Credibility matters.
📌 Final Thought:
Game theory doesn’t tell you what to do—it shows you the structure of a situation so you can make smarter choices. It reveals the hidden logic in conflict, cooperation, competition, and coordination.
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Crash Course — 1-Hour
Goal: Get a fast, solid grasp of game theory basics (Nash Equilibrium, Prisoner’s Dilemma, Dominant Strategies, etc.)
Resources:
YouTube: Game Theory 101 by William Spaniel (30 min)
→ https://youtube.com/playlist?list=PL8dPuuaLjXtOfse2ncvffeelTrqvhrz8H
TED-Ed: The Prisoner's Dilemma (5 min)
TED-Ed: Why Do Competitors Open Their Stores Next to One Another? (4 min)
Veritasium: How to Use Game Theory to Outthink Your Competition (10 min)
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Deep Dive — 10-Hours
Videos & Visual Explainers
CrashCourse Game Theory Full Series (~2.5 hrs)
→ https://youtube.com/playlist?list=PL8dPuuaLjXtOfse2ncvffeelTrqvhrz8H
Kurzgesagt: The Riddle of the Prisoner’s Dilemma (7 min)
Bonus rabbit holes: Game theory in poker, auctions, warfare, or business strategy
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Podcasts
EconTalk – McAdams on Game Theory
→ https://www.econtalk.org/mcadams-on-game-theory-and-the-nash-equilibrium/
Freakonomics – Solve for X: Could Solving This One Problem Solve All the Others?
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Reading
The Art of Strategy by Dixit & Nalebuff
→ Skim intro + 2–3 chapters
Bonus: Superforecasting by Tetlock (game theory in prediction)
Online: GameTheory.net – concept index and examples
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Interactive / Experiential
The Evolution of Trust (interactive explainer – 30 min)
Optional: Try Diplomacy, Among Us, or a strategy game through a game theory lens
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Final Notes & Reflections
Which concept most surprised you?
Where can you apply this in your work or life?
What are you curious to explore next?
If this sucks it’s because ChatGPT wrote it!
