Game theory is a branch of mathematics and economics that studies strategic interactions between rational decision-makers. It provides a framework for analyzing situations in which the outcome of an individual’s decision depends not only on their own actions but also on the actions of others.

Key concepts and components of game theory include:

1. Players: Individuals, entities, or agents involved in the strategic interaction. Players can be individuals, companies, nations, or any other decision-making entities.
2. Strategies: The set of possible actions or choices available to each player. A strategy specifies what action a player will take in any possible circumstance.
3. Payoffs: The outcomes or rewards associated with different combinations of strategies chosen by the players. Payoffs represent the preferences or utilities of the players and may be expressed in terms of monetary rewards, satisfaction, or any other relevant metric.
4. Games: Formal representations of strategic interactions, consisting of players, strategies, and payoffs. Games can be classified based on factors such as the number of players (e.g., two-player games, multiplayer games), the information available to players (e.g., complete information games, incomplete information games), and the timing of decisions (e.g., simultaneous move games, sequential move games).
5. Nash Equilibrium: A concept introduced by mathematician John Nash, a Nash equilibrium is a set of strategies, one for each player, such that no player has an incentive to unilaterally change their strategy, given the strategies chosen by the other players. In other words, it is a stable state where no player can improve their payoff by deviating from their current strategy.
6. Types of Games: Game theory encompasses various types of games, including but not limited to:
   • Prisoner’s Dilemma: A classic example illustrating the tension between individual rationality and collective rationality.
   • Coordination Games: Games where players can benefit from coordinating their actions.
   • Zero-Sum Games: Games in which the total payoff to all players is constant, meaning one player’s gain is exactly balanced by another player’s loss.
   • Cooperative Games: Games where players can form coalitions and make binding agreements.
   • Sequential Games: Games in which players make decisions in sequence, with each player observing the actions of previous players.
   • Repeated Games: Games that are played multiple times, allowing for the possibility of strategic considerations over time.
7. Applications: Game theory has applications in various fields, including economics, political science, biology, computer science, and sociology. It is used to analyze strategic interactions in markets, negotiations, auctions, voting systems, evolutionary biology, military conflicts, and more.

Overall, game theory provides valuable insights into decision-making in situations where multiple actors with conflicting interests interact strategically. It helps understand how rational individuals make choices and predict the outcomes of complex interactions.