Game Theory

Once again on the subject of educating yourself. Game Theory is something that can help you to make decisions. It works with psychology, with investing, with poker.. So when you understand it you have, simply said, much more stronger knowledge to make strategic decisions based on your information.

Maybe the easiest way to study Game Theory is as an online course in Coursera. It only requires a simple registration and even though the course has ended already (so you can't do the exam anymore) all the materials and video lectures are still available for you to study. They are very clear in their explaining so I highly recommend them.

This course is held by Kevin Leyton-Brown (The University of British Columbia), Matthew O. Jackson and Yoav Shoham (both from Stanford University). So quality of the teachers and the course is high.

About the Course

Popularized by movies such as "A Beautiful Mind", game theory is the mathematical modeling of strategic interaction among rational (and irrational) agents. Beyond what we call 'games' in common language, such as chess, poker, soccer, etc., it includes the modeling of conflict among nations, political campaigns, competition among firms, and trading behavior in markets such as the NYSE. How could you begin to model eBay, Google keyword auctions, and peer to peer file-sharing networks, without accounting for the incentives of the people using them? The course will provide the basics: representing games and strategies, the extensive form (which computer scientists call game trees), Bayesian games (modeling things like auctions), repeated and stochastic games, and more. We'll include a variety of examples including classic games and real-world applications.

Wikipedia definition: Game theory is a study of strategic decision making. More formally, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers." An alternative term suggested "as a more descriptive name for the discipline" is interactive decision theory. Game theory is mainly used in economics, political science, and psychology, as well as logic and biology. The subject first addressed zero-sum games, such that one person's gains exactly equal net losses of the other participant(s). Today, however, game theory applies to a wide range of class relations, and has developed into an umbrella term for the logical side of science, to include both human and non-humans, like computers. Classic uses include a sense of balance in numerous games, where each person has found or developed a tactic that cannot successfully better his results, given the other approach. 

Modern game theory began with the idea regarding the existence of mixed-strategy equilibria in two-person zero-sum games and its proof by John von Neumann. Von Neumann's original proof used Brouwer's fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathematical economics. His paper was followed by his 1944 book Theory of Games and Economic Behavior, with Oskar Morgenstern, which considered cooperative games of several players. The second edition of this book provided an axiomatic theory of expected utility, which allowed mathematical statisticians and economists to treat decision-making under uncertainty. 

This theory was developed extensively in the 1950s by many scholars. Game theory was later explicitly applied to biology in the 1970s, although similar developments go back at least as far as the 1930s. Game theory has been widely recognized as an important tool in many fields. Eight game-theorists have won the Nobel Memorial Prize in Economic Sciences, and John Maynard Smith was awarded the Crafoord Prize for his application of game theory to biology.  More information by Wikipedia.

So if you are interested to improve your skills I highly recommend you to go through this course and www.coursera.org is a great way to do it whenever you have the time to focus on it.
They also have plenty of other courses and more to come that can be useful knowledge for investors, so check them out and lets IMPROVE OUR SKILLS TO RULE THE MARKETS ;)