What you will learn
The Prisoner's Dilemma
Two people are questioned separately and cannot communicate. Each can stay silent or betray the other. Betraying pays more no matter what the other person does, so two rational players both betray, and both end up worse off than if they had trusted each other. That gap between individual logic and collective outcome is why it is called a dilemma.
It explains why competing firms slide into price wars, why arms races are hard to stop, and why shared resources get overused. The escape route is repetition. In Robert Axelrod's tournaments in 1980, the winning strategy was tit-for-tat: cooperate first, then copy whatever your opponent did last. Across experiments, roughly half of people cooperate in a single round, and that share rises as the reward for cooperating grows.
Nash Equilibrium
A Nash equilibrium is a set of choices where no player can do better by changing their own move alone, given what everyone else is doing. It is the resting point of a strategic situation, which makes it the main tool for predicting where competition settles: matched prices, crowded product categories, candidates drifting to the political centre.
Stable does not mean good. In the Prisoner's Dilemma, mutual betrayal is the equilibrium even though mutual cooperation would pay both players more. John Nash proved in 1950 that every finite game has at least one equilibrium, work that shared the 1994 Nobel Memorial Prize in Economics with John Harsanyi and Reinhard Selten.
Prospect Theory
Classical economics says we judge outcomes by their final value. Prospect theory, set out by Daniel Kahneman and Amos Tversky in 1979, says we judge them as gains or losses measured from wherever we currently stand, and that a loss tends to loom larger than an equivalent gain. It also predicts a pattern that pure logic does not: we play safe to protect a gain, but gamble to avoid a certain loss.
The effect of wording is large and well replicated. In the original study, 72% of people chose the safe option when it was described in terms of lives saved, but only 22% chose it when the identical odds were described in terms of deaths. The often-quoted claim that losses hurt exactly twice as much comes from a small 1992 study, and later analyses put the figure anywhere from near parity to well above two, so treat the direction as solid and the precise multiple as unsettled.
Rational Choice Theory
The baseline model behind most of economics: a rational agent weighs each option by its expected value, meaning each outcome multiplied by its probability, and picks the highest. A 25% chance of $200 is worth $50, so it should beat a guaranteed $45.
It is a useful fiction rather than a description of people. Humans consistently pay a premium for certainty and react asymmetrically to losses. Those deviations are not random noise, they are systematic and predictable, which is exactly what behavioural economics studies and what makes the model still worth knowing as a reference point.
The Ultimatum Game
One player proposes how to divide a sum of money. The other can accept, in which case the split stands, or reject, in which case both get nothing. Pure self-interest says the responder should accept any amount above zero, and the proposer should therefore offer the minimum.
People do not play that way. A meta-analysis covering 37 studies found the average offer is around 40% of the pot and about 16% of all offers are rejected, with offers near 20% refused roughly half the time. First run by Guth, Schmittberger and Schwarze in 1982, the result holds across many countries, showing that people will pay a real personal cost to punish an offer they consider unfair.
Common questions
What is game theory, in plain terms?
Game theory is the study of decisions where the outcome depends not only on what you do but on what other people do at the same time. It gives you a way to reason about negotiation, competition and cooperation instead of guessing.
Do I need any maths background?
No. Every game here is played by clicking a choice or moving a slider, and the reasoning is explained in words afterwards. The arithmetic never goes beyond multiplying a payoff by a probability.
How long does it take?
Each of the five games takes about ten minutes, and you can stop after any one of them. Your progress is saved in your browser, so you can return later on the same device.
Is it free?
Yes. All five games, the quizzes, the daily challenge and your decision profile are free, with no account required.
What is a decision profile?
As you play, your choices are scored on five traits: risk appetite, cooperation, fairness, rationality and resistance to framing. Those combine into a named decision type that you can share.