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Bargaining as Game Theory: Strategic Decision-Making and Financial Literacy

As parents, we often look for creative and engaging ways to introduce financial concepts to our children. One fascinating approach to financial decision-making is exploring the world of game theory, a branch of mathematics that delves into strategic thinking and decision-making. In this post, we'll explore how introducing kids to game theory can help them understand bargaining, strategic decision-making, and how it relates to everyday life.

What is Game Theory?

Game theory is a branch of mathematics that studies how people make strategic decisions when interacting with others. It has roots in mathematics, psychology, and economics and helps us understand human behavior, predict outcomes, and make informed decisions. When kids grasp the basics of game theory, they develop skills in logic, strategic thinking, and critical decision-making. These skills apply to economics and translate into their everyday lives.

Understanding Bargaining Through Game Theory

One of the most relatable ways to introduce kids to game theory is by exploring how it relates to bargaining. Bargaining involves strategic decision-making, whether it's haggling over the price of a toy or negotiating with a sibling over an activity. By framing these scenarios as "games," you can help your kids better understand the concept of game theory.

Actionable Steps to Teach Kids about Game Theory and Bargaining:

  1. Start with Simple Games: Begin with games and puzzles that involve decision-making. For instance, games like Rock-Paper-Scissors or Tic-Tac-Toe are excellent starting points. Discuss strategies and decision-making as you play these games together. Catan Junior is another board game that would be good for this.

  2. Bargaining Scenarios: Use real-life situations involving bargaining, like garage sales or flea markets. Even choosing a movie on a Friday night or deciding on the family's weekend activities can be useful here. Talk through ways to reach a fair agreement.

  3. Reward Systems: Use a reward system to demonstrate the concept of incentives. Create a system where good behavior or chores are rewarded. Discuss how these rewards can influence decisions.

  4. “Trading” Game: Use household items as “currency” and have your child engage in trading or bartering with you or their siblings. In our house, trading Pokemon cards would be a good example. It’s a lighthearted way to explore the concept of value and negotiation.


Teaching kids about financial literacy is a valuable investment in their future. By introducing them to the world of game theory, you're helping them develop essential life skills. Game theory isn't just a mathematical concept; it's a practical tool that can be used in various aspects of life, from making wise financial decisions to resolving conflicts with friends and family. Try practicing at home!

Check out additional resources and activities on the RESOURCES page here.

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