Game Theory & Behavioral Economics

Why do people cooperate when competing might benefit them? Why do businesses sometimes make decisions that hurt their own profits? Why do people reject seemingly rational choices because they feel unfair, risky, or untrustworthy?Game theory & behavioral economics: The basics of behavioral game theory introduces readers to the fascinating intersection of game theory, behavioral economics, psychology, and strategic decision making.Traditional game theory helps us understand what happens when the outcome of your decision depends on the decisions of other people. Behavioral economics adds another important piece: people do not always behave as perfectly rational decision makers. Emotions, biases, trust, fairness, expectations, past experiences, and social influences can all change the choices we make.This beginner-friendly guide brings these two areas together to explain behavioral game theory, an approach that looks at how people actually behave in strategic situations.Readers will explore important game theory concepts such as players, strategies, payoffs, dominant strategies, Nash Equilibrium, the Prisoner's Dilemma, cooperation, repeated games, and strategic interaction. These concepts are explained in straightforward language and connected to situations involving businesses, consumers, negotiations, competition, relationships, markets, and everyday decisions.The book also explores how behavioral concepts such as bounded rationality, loss aversion, fairness, reciprocity, overconfidence, social preferences, cognitive biases, and emotions can influence strategic choices.Instead of assuming that everyone will always choose the mathematically perfect strategy, behavioral game theory asks a more realistic question: What do people actually do when their choices depend on what they think someone else will do?Whether you are a student, business owner, marketer, professional, or simply interested in understanding human behavior, this guide provides an accessible foundation for thinking more strategically about choices, competition, and cooperation.