Compositional game theory

TL;DR

This paper introduces open games as a compositional framework for economic game theory, enabling the application of computer science methods to large-scale models through categorical composition and visual string diagrams.

Contribution

It presents a novel categorical approach to game theory with open games as morphisms, including the concept of coutility and their representation via string diagrams.

Findings

Open games can faithfully represent various games with equivalent Nash equilibria.

Open games can be composed into sequential and simultaneous move games.

String diagrams provide an intuitive visualization of information flow in games.

Abstract

We introduce open games as a compositional foundation of economic game theory. A compositional approach potentially allows methods of game theory and theoretical computer science to be applied to large-scale economic models for which standard economic tools are not practical. An open game represents a game played relative to an arbitrary environment and to this end we introduce the concept of coutility, which is the utility generated by an open game and returned to its environment. Open games are the morphisms of a symmetric monoidal category and can therefore be composed by categorical composition into sequential move games and by monoidal products into simultaneous move games. Open games can be represented by string diagrams which provide an intuitive but formal visualisation of the information flows. We show that a variety of games can be faithfully represented as open games in the sense of having the same Nash equilibria and off-equilibrium best responses.