A mathematical theory of decision-making by participants with conflicting interests in a competitive situation, originated by Emile Borel in 1921 and rigorously established by John von Neumann in 1928. The theory attempts to gain insights into economic situations by isolating these aspects, which occur in their simplest form in games of strategy.
In a two-player game, as defined by the theory, each participant has a choice of plays for which there are several possible outcomes, gains or losses, depending on the opponent’s choice. An optimum strategy states the relative frequency with which a player’s choices should be used, so as to maximize his average gain (or minimize his average loss). The problem of determining the optimum strategy can be formulated as a problem in linear programming. Generalizations to n-person games are included in the theory.