By definition, game theory is a powerful and widely adopted mathematical framework for analyzing strategic interactions between rational individuals, institutions, or entities. It plays a vital role across various areas of society by helping to explain how and why decision-makers behave the way they do.

But what does game theory look like in practice? What kinds of ‘games’ fall under this concept, and how do they enhance our understanding of strategic behavior in real-life situations?

In this article, we’ll explore five core types of games commonly discussed in the field, provide real-life examples from economics and beyond, and introduce some of the most influential thinkers, many of whom are Nobel Laureates, who have helped shape this dynamic discipline throughout the years. 

1. Zero-sum vs. non-zero-sum games

Zero-sum games: when one player’s gain is another’s loss

In game theory, a zero-sum game describes a situation where one player’s gain comes at the expense of another player’s loss, but the total gains and losses of all players ultimately add up to zero. Classic examples include chess, poker, or competitive sports like tennis and football, where if one player or team wins, the other necessarily loses.

Modern game theory started with a new way of thinking about zero-sum games, especially the idea of a mixed-strategy equilibrium in games between two players 1. This concept was developed by mathematician and physicist John von Neumann, where he showed that players don’t always have to choose the same move every time and are capable of switching between different strategies at random to stay unpredictable. Using a mathematical idea called Brouwer’s fixed-point theorem 2, von Neumann then proved that a stable outcome (i.e. an ‘equilibrium’), always exists in these kinds of competitive games. This idea is what eventually became the foundation of the game theory that we know today.

Non-zero-sum games: exploring win-win outcomes

In contrast, non-zero-sum games offer the possibility for all players to either benefit or lose together. This dynamic more closely mirrors real-world cooperation and interdependence, such as in trade negotiations, business partnerships, or climate agreements.

Nobel Laureate Robert J. Aumann is a key figure in advancing our understanding of non-zero-sum dynamics, particularly through his groundbreaking work on repeated games 3. He demonstrated that even in situations where players initially act non-cooperatively, repeated interactions can lead to new possibilities for cooperation and create new equilibria over time 4. Aumann’s insights played a significant role in shaping negotiations during the Cold War arms race, and continue to influence modern strategies in conflict resolution, diplomacy, and economic collaboration 3.

2. Symmetric vs. asymmetric games

Symmetric games: equal rules, strategic choices

A symmetric game in game theory is one where the players are identical in terms of their roles and available strategies, where no one has an inherent advantage based on position. What matters is how and when each player chooses to deploy their strategy.

The Prisoner’s Dilemma is another well-known example of a symmetric game, especially when applied to pricing strategies in competitive markets. Consider two identical companies selling similar products in the same market. Each company has access to the same set of strategies: either maintain high prices or reduce them to attract customers. If both keep prices high, they benefit from strong margins. But if one company decides to cut prices while the other doesn’t, it may gain market share at the other’s expense. And if both lower their prices, they risk eroding profits. Even though cooperation (keeping prices high) leads to better outcomes, the temptation to undercut can result in worse outcomes for both.

Asymmetric games: unequal positions, unique advantages

Asymmetric games are situations where players begin with different strategies, payoffs, or resources, putting them in unequal positions from the start. This setup often reflects real-life scenarios in economics, politics, and society, such as when a smaller company enters a market already dominated by a larger, established competitor offering similar products.

A key figure in this area of game theory is Roger B. Myerson, who, along with Leonid Hurwicz and Eric S. Maskin, received the 2007 Nobel Memorial Prize in Economic Sciences for their work on mechanism design theory 5. Mechanism design theory is a branch of game theory that focuses on identifying the most effective set of rules to achieve desired outcomes, even when each player acts in their own self-interest 6.

This theory is particularly useful in scenarios that involve complex asymmetric dynamics, such as auctions, elections, or policy-making, where individuals often hold different levels of private information and pursue goals that vary in both nature and complexity.

3. Simultaneous move vs. sequential move games

Simultaneous move games: decisions made at the same time

Within game theory, simultaneous move games are when two or more players make decisions at the same time without knowing what the other players will decide.

In the realm of economics, we can also see this in closed-auction bidding. This is when all participants place their bids at the same time, without knowing what others have offered. The winner is the one with the highest bid—but how can a player decide on the right strategy without full information?

Sequential move games: decisions made one after another

Sequential move games involve players taking turns, where each player can observe the other’s past moves and develop strategies to anticipate future ones. This can be seen in many classic board games like chess and backgammon, as well as in real-world economic situations like negotiations, advertising campaigns, and strategic business decisions.

Nobel Laureate Robert J. Aumann’s work on repeated games has also significantly contributed to understanding how interactions in sequential move games can foster cooperation and influence outcomes, even when the participants start off as non-cooperative 3. This is a key idea that continues to shape the game theory we know today. 

4. Cooperative vs. non-cooperative games

Cooperative games: aligning interests over time

As one of the most studied branches of game theory, the study of cooperative game theory is designed to understand scenarios where players form groups (i.e. ‘coalitions’) as compared to acting on their own. It focuses particularly on finding how the benefits and costs of cooperative effort can be divided equally amongst these coalitions, ensuring that the maximum payoff can be achieved while maintaining fairness throughout the game.

One of the most popular and effective ways to fairly divide rewards in cooperative games is through the Shapley value, introduced by Nobel Laureate Lloyd Shapley in the 1950s 7. However, the calculation becomes increasingly complex as the number of participants grows, making it more suitable for scenarios with a smaller group of players 7.

Non-cooperative games: strategic moves with self-interest in mind

Non-cooperative game theory focuses on situations where players act independently without any binding agreements in place. Each player develops their own strategy to maximise personal outcomes, while still considering what others might do. Although collaboration can still occur, it’s driven purely by self-interest and strategic thinking, not by formal cooperation. Classic examples include competitive markets, where firms operate independently, and certain forms of auctions, where bidders rely on private valuations to win the bid.

5. Perfect vs. imperfect information

Perfect information: full transparency, every move is visible

Perfect information games are part of sequential games, where all previous moves made by players are completely visible to everyone else, just like in a game of chess, checkers, or go. This means players have full access to everything they need to plan their next move strategically, without any information being hidden from them. In economics, however, perfect information is more of a theoretical construct than a real-world norm. In practice, it's common for different market participants to withhold some degree of information from each other, making true perfect information rare outside of controlled models.

Imperfect information: making decisions with missing or hidden details

Imperfect information often overlaps with incomplete information, where players don’t just miss out on each other's moves, as they might also lack insight into payoffs or player types. Roger B. Myerson, who received the Nobel Prize in 2007, made major contributions here through his work on mechanism design and Bayesian games. His research helped formalize how players make smart strategies even when they hold private information, like in auction settings, where you never really know what the others are thinking or willing to pay.

Key foundations of game theory: a summary

Game theory might seem abstract at first, but its real-world relevance becomes much clearer as we explore the different types of games and how they shape the decisions and dynamics we see every day. These games, together with decades of work by Nobel Laureates and other brilliant minds, have helped us make sense of how people and organizations interact not just in economics, but also in politics, society, and beyond.

Furthermore, a lot of what we take for granted today, like how markets work or how decisions are made in competitive environments, actually has game theory working quietly in the background. And as the world becomes more connected and fast moving, the ideas behind game theory will likely keep playing a big part in shaping how we navigate it all.

 

References

  1. Von Neumann J, Morgenstern O. Theory of games and economic behavior. 60th anniversary ed. Princeton: Princeton University Press; 2007. Available from: https://press.princeton.edu/books/paperback/9780691130613/theory-of-games-and-economic-behavior​
  2. Weintraub ER, editor. Toward a history of game theory. Durham: Duke University Press; 1992. Available from: https://books.google.com/books?id=9CHY2Gozh1MC&pg=PA113​
  3. UBS. Robert Aumann & game theory psychology. UBS Nobel Perspectives. [cited 2025 Apr 30]. Available from: https://www.ubs.com/microsites/nobel-perspectives/en/laureates/robert-aumann.html​
  4. Aumann RJ. War and peace. Nobel Prize Lecture; 2005 Dec 8; Stockholm, Sweden. Available from: https://www.nobelprize.org/uploads/2018/06/aumann-lecture.pdf​
  5. NobelPrize.org. The Nobel Prize in Economics 2007 - Speed read: Optimizing social institutions. [cited 2025 Apr 30]. Available from: https://www.nobelprize.org/prizes/economic-sciences/2007/speedread/​
  6. Royal Swedish Academy of Sciences. Scientific background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2007: Mechanism design theory. 2007 Oct 15. Available from: https://www.nobelprize.org/uploads/2018/06/advanced-economicsciences2007.pdf​
  7. ScienceDirect. Cooperative game theory. [cited 2025 Apr 30]. Available from: https://www.sciencedirect.com/topics/computer-science/cooperative-game-theory​