Game Theory and Nash Equilibrium in Rock Paper Scissors

Abstract

Game theory is a theory that has been widely used and analyzed in real life circumstances such as trading or investing. It is the study of strategic decision making. This theory can be modeled and applied to mathematics or economy to help people, societies, and governments make better decisions. This paper will discuss the basic concepts of game theory, such as what is game theory, the basic elements of game theory and the practical application of game theory. This paper will elaborate the principles of game theory through the example of rock paper scissors. This paper will also explain the concept of Nash equilibrium, which is a special equilibrium in game theory. This paper will use another example to show under which circumstances Nash equilibrium will be achieved. Through Nash equilibrium theory and case analysis, it is found that rational people will maximize their own interests by looking for a Nash equilibrium in their daily behavior decisions. This indicates that when making some decisions, society and the government need to consider and look for Nash equilibrium as much as possible, so that the whole country can obtain the maximum benefit.