Simply put Game Theory studies decision-making, where the outcome of each "player" depends on the actions of other "players".
The dictionary describes game theory as "The branch of mathematics concerned with the analysis of strategies for dealing with competitive situations where the outcome of a participant's choice of action depends critically on the actions of other participants.
Despite focusing on mathematics, Game Theory has been used in various fields such as social sciences, business and biology.
While Game Theory is a useful tool to analyze and solve problems, it does have problems.
- Game Theory relies on simplified models and on a simplified structure.
- Game Theory has a key assumption that players will react rationally and have complete and accurate information.
For more information see "The Limitations of Game Theory".