Step 1: The Choice Map

In Game Theory, we use a Payoff Matrix to visualize how your decisions interact with someone else's.

The Other Person (Columns)

You (Rows)

	Choice A	Choice B
Option 1	?, ?	?, ?
Option 2	?, ?	?, ?

You control the Rows. They control the Columns. The four boxes represent every possible reality that could occur.

Step 2: What are "Payoffs"?

The numbers in the boxes aren't always just dollars. They represent Utility—a measure of how "happy" or "satisfied" a player is with an outcome.

Why no units? Because payoffs represent a ranking of outcomes. A payoff of "10" is simply better than "5." It could mean 10 apples, 10 dollars, or 10 minutes of saved time.

10, 5

When you see (10, 5):

The First Number (10) is always for the Row Player (You).
The Second Number (5) is always for the Column Player (Them).

Step 3: Scenario Practice

The Scenario: You and a rival are deciding whether to Advertise or Save money. Advertising attracts customers, but it's expensive.

Rival Company

Your Company

	Advertise	Save
Advertise	5, 5	20, 2
Save	2, 20	12, 12

The Challenge: If you choose to Advertise and your rival chooses to Save money, what is YOUR payoff?

Class 1 Complete!

You've successfully decoded the language of Game Theory.

Key Takeaways:

Rows are yours; Columns are theirs.
Payoffs represent preference/utility, not just cash.
In (A, B), A belongs to the row and B belongs to the column.

Next time, we'll ask: "Knowing these payoffs, what is the smartest move to make?"