Theory of Games and Economic Behavior

A 1944 book by John von Neumann and Oskar Morgenstern that established a mathematical framework for analyzing strategic interaction and economic behavior.

Game theory: The mathematical study of strategic interaction among decision-makers. The book established the framework that became this broader field.
Minimax theorem: A theorem equating the best guaranteed payoff for each player in a finite zero-sum game. It provides the central solution principle for the book’s zero-sum games.
John von Neumann: A Hungarian-American mathematician whose work shaped modern mathematics, physics, and computing. He supplied the mathematical foundations and coauthored the book.
Economics: The social science that studies production, distribution, and consumption of goods and services. The book introduced tools that changed how economists modeled interacting choices.
Utility theory: The study of how preferences can be represented and used to evaluate outcomes. The book gave expected utility a rigorous role in decisions under risk.
Mixed strategy: A probability distribution over a player’s available actions in a game. Randomized choices let players reach optimal strategies when no pure choice suffices.
Oskar Morgenstern: An Austrian-American economist known for work on economic forecasting and strategic interaction. He brought economic questions and motivation to the collaboration.
Non-cooperative game theory: The study of games in which players make decisions without binding cooperation agreements. Later game theory developed a distinct framework for strategic interaction between individuals.
Expected utility hypothesis: The hypothesis that choices under uncertainty can be represented as maximizing expected utility. Its axiomatic treatment underpins the book’s account of rational choice under risk.
Characteristic function: A function assigning each coalition in a cooperative game the value it can achieve. It encodes the coalition opportunities used in the book’s cooperative analysis.

Linked from 9 pages