A game is a formal tool for describing a strategic situation. Game theory refers to a model of optimal decision making between different players. Besides, game theory is instrumental in ascertaining the relationships between different players in a game and their respective courses of actions or strategies in a particular game. In game theory, different players or participants of a game must make decisions or choices that will consequently affect the other players or participants of the game. Hence, game theory is a tool that is used to determine the relationships that exists between different participants of a game and their respective optimal decisions under conflicting and competitive situations. The idea of game theory is used in many fields including economics and mathematics (Durlauf, 2010).

Game theory was first used to address a zero-sum game. In a zero-sum game, a particular gain to one player results in a consequent loss to the other player or players in the game. Furthermore, each and every player in a zero-sum game has a full understanding of the strategic courses of actions of their opponent players and the consequences that are associated with them. Hence, game theory was utilized as the available mechanism that can be used by different players in the game to maximize or increase their profits and at the same time minimize their losses using their different strategies (Zamir & Maschler, 2011).

The origin of game theory is traced way back to the mid-nineteenth century to explain the underlying regulations and rules that governed the behavior of the duopolists in a market. Since then, it attracted the attention of many powerful mathematicians who extended the knowledge to various subfields in life. The pioneering tasks of the analysts who ventured into game theory were to find the best game strategies or choices that could minimize their possible losses while considering the courses of actions of other participants of the game. Contrary to that, game theory experienced a golden advancement between the year 1950s and 1960s when researchers decided to specialize in finding an equilibrium solution for solving a game when all the participants of the game behave rationally. Thus, Nash equilibrium was developed. Since then other strategies of finding game solutions have been developed leading to the current dynamism of the concept of game theory (Durlauf, 2010).

Game theory is essential in economics because it is used by different economic players to solve their business complications. The integration and interaction of different economic players in the market each of them with an aim of maximizing their outcomes is common in every economic setup. The knowledge of game theory is instrumental is setting standard pricing criteria in different economic set ups and consequently assist in the stabilization of the economic diversities that arise from time to time. Hence, game theory provides a structured market analysis criterion that can enable different players to minimize their losses and consequently maximize their profits. Besides, game theory is a special tool that can enable the economic participants of the game to arrive at the best decisions that will enable them to remain competitive in the market (Fudenberg & Tirole, 2010).

Game theory is essential everyday life for solving different decision-making dilemmas. One can use the knowledge of game theory to arrive at rational leadership decisions that are acceptable to everybody. Besides, game theory is instrumental in the stabilization of different economic set ups in the society. The same knowledge can be extended towards the analysis of different economic behaviors around the world including the behavior of the consumers, firms, and markets amongst other important economic players. Furthermore, the knowledge of game theory can also be used to predict, explain, and describe different life behaviors including animal and human behaviors. In fact, game theory has been extended to psychology, politics, and sociological aspects of life over the recent years (Durlauf, 2010).