# Gaming the System

Fundamentals of Game Theory

## Game Theory

"... is the study of mathematical models of strategic interaction between **rational** decision-makers. It has applications in all fields of social science, as well as in logic and computer science."

## The Prisoner's Dilemma

"... is a standard example of a game analyzed in game theory that shows why two completely rational individuals might not cooperate, even if it appears that it is in their best interests to do so."

### The Game

"Two members of a criminal gang are arrested and imprisoned. Each prisoner is given the opportunity either to betray the other by testifying against them, or to cooperate with the other by remaining silent."

### Choice and Consequence

### Tournament Rules

- Each pair gets
**5 decisions** total
- Take your points after each decision
- After your last decision, count your points
- The player with the
**fewest points** is **eliminated**
**Ties** are settled with a coin toss
- The last remaining player wins a
**prize**!

### Changing the Rules

- Each pair gets
**5 decisions** total
- Take your points after each decision
- After your last decision, count your points
- Write the number of points for the match on a piece of paper
**All players continue playing**
- The player with the
**most points**, after **4 matches** have been played, wins!

## Bitcoin Mining

- Miners are tasked with solving a computational task
- When the task is solved, the miner can create a new "block"
- A block is a chunk of data (transactions)
- The miner decides which transactions to include in the block
- And the miner awards themselves 12.5 bitcoin
- If the miner cheats, they lose the reward

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