Algorithmic Game Theory is not just theory. It helps solve real problems around us. Let’s look at some examples you might know from daily life. 🌍
When you search on Google, you often see ads at the top. These ads are not random. Companies pay to be there.
But how does Google choose which ad to show? Google uses an auction. It’s called a "second-price auction." The highest bidder wins, but they pay the price of the second-highest bid.
This system is fair. It also motivates companies to bid honestly.
Example: Think of an eBay auction. If you really want a phone, you might bid $300. If the next highest bid is $250, you win but only pay $250. That’s how Google Ads works too.
Ever tried booking an Uber on a rainy evening? Prices are high. That’s called surge pricing.
Uber uses game theory to set prices based on demand and supply. When many people want a ride, prices go up. This encourages more drivers to come online. It also helps balance the system.
Example: Think of pizza delivery. If many people order at once, you wait longer. If the price is higher, fewer people will order, and delivery becomes faster.
Bitcoin is a digital currency. It runs without any central bank. But who keeps it safe? Miners do. They verify transactions.
Why do they do it? Because they earn rewards. Bitcoin uses smart incentives to make people do useful work.
This is also game theory. Everyone is selfish, but the system is built so selfish actions help the network.
Example: Imagine a group project. If your grade depends on your part, you work harder. If helping the group also helps you, everyone wins.
Apps like Instagram or TikTok fight for your attention. They use game theory to decide what to show you.
The goal is to keep you online longer. They learn your behavior. Then, they use smart algorithms to predict what you will like next.
Example: Netflix autoplay is a trick. If the next show starts quickly, you might not stop watching. That’s game theory in action.
Google Maps shows you the fastest way. But what if everyone follows the same route?
Game theory helps manage this. It tries to spread people across different paths. This reduces traffic jams.
Example: In a classroom, if everyone uses the same door, it’s slow. If people use different exits, everyone leaves faster.
Platforms like Amazon or Etsy match buyers and sellers. They use algorithms to recommend products and manage pricing.
Game theory helps these platforms ensure fair pricing and better search results.
Example: Imagine a street market where sellers compete by lowering prices. It’s the same online.
Apps like Tinder use game theory to match users. They predict who will like whom.
The goal is to find matches that will talk and meet.
Example: It’s like organizing a party. You want everyone to meet someone fun and friendly.
LinkedIn or Upwork match people with jobs. They use algorithms to suggest jobs you might apply for.
Game theory helps with fair matching and balancing job offers.
Example: Like a job fair where companies and people both try to find the best deal.
Games like Fortnite or League of Legends match players based on skills. They want balanced teams.
Game theory helps build fair matches and reduce cheating.
Example: Think of playing soccer. You want teams to be even, so it’s fun.
Governments use game theory to encourage people to get vaccinated. If most people get vaccinated, the virus spreads less.
But if too many skip it, everyone is at risk. Game theory helps design smart rules or rewards.
Example: Like a group lunch. If everyone brings food, the meal is great. If no one does, there’s nothing to eat.
Countries need to reduce pollution. But no one wants to act alone.
Game theory helps create fair agreements where everyone takes part.
Example: It’s like cleaning a shared apartment. If only one person cleans, it's not fair. Everyone needs to help.
In shared spaces like airports or cafes, many people use the same Wi-Fi. Too many users slow it down.
Game theory helps design fair ways to share internet speed.
Example: Think of pizza at a party. If a few people take too much, others get nothing.
Sites like Coursera use algorithms to suggest courses. They want students to stay engaged and succeed.
Game theory helps match students to the right content and feedback.
Example: Like a personal tutor who gives just the right challenge.
Governments sell wireless frequencies to telecom companies. These are called spectrum auctions.
Game theory helps make sure these auctions are fair and efficient.
Example: It’s like giving radio channels to stations without making them overlap.
When you shop online, sites show "People also bought" or "You may like".
Game theory helps choose what to show based on your actions and others'.
Example: Like friends suggesting a movie you might enjoy based on what you liked before.
Airlines often sell more tickets than seats. Why? Because not everyone shows up.
Game theory helps airlines decide how many extra tickets to sell without making too many people angry.
Example: Like planning a party. You invite 20 friends but prepare for 15. If all 20 come, it’s a tight squeeze!
Stores give points or rewards to repeat customers. Why? To keep you coming back.
This is game theory — using future rewards to influence your current choice.
Example: Like your favorite coffee shop giving a free drink after 5 visits. You keep going there.
On sites like Fiverr or Freelancer, many people bid for one job. Game theory helps you decide how much to charge to win but still earn enough.
Example: Like selling handmade jewelry. If you price too high, no one buys. Too low, and you earn too little.
Platforms like Spotify or YouTube recommend what you’ll play next. They compete for your time.
Game theory helps them keep you on the platform longer without boring you.
Example: Like a DJ at a party. They must read the crowd and choose the next perfect song.
Apps like BlaBlaCar match drivers with passengers going the same way. Pricing and matching use game theory.
Example: Like sharing a cab with friends to split the cost. Everyone wins.
Some sellers write fake reviews to boost products. Platforms use game theory to detect and punish such behavior.
Example: Like spotting who’s cheating in a group project. Smart rules help keep things fair.
Candidates use game theory to plan ads, speeches, and visits. They target areas where they can win the most votes.
Example: Like choosing which friends to ask for help in different classes — where your chances are highest.
Teams use game theory to plan moves. Should they attack or defend? Copying others or doing something different can be the key.
Example: Like penalty kicks. Will the player shoot left, right, or center? It’s all mind games.
Rare items are sold online. Prices go up fast. Game theory helps you know when to bid and when to stop.
Example: Like grabbing the last slice of cake. You wait too long — someone else takes it.
Some schools use matching systems to place students fairly. These are designed with game theory to prevent cheating the system.
Example: Like picking roommates or project partners. Everyone lists choices, and the system finds the best match.
Algorithmic Game Theory is everywhere. It helps apps, companies, and even digital money work better. It uses smart rules to make sure that even when people act in their own interest, the system still works well.
Next time you book an Uber or watch YouTube, remember — there’s game theory behind the scenes! 🎯