Analytics
Prescriptive Analytics
Game Theory Applications

Game Theory & Strategic Decision Making

Game theory analyzes strategic interactions between rational decision-makers, providing frameworks for optimizing outcomes in competitive and cooperative scenarios across business, economics, and operations research.

Mathematical Foundations

Game Representation

A strategic game consists of:

  • Players: Set [mathematical expression] of decision makers
  • Strategies: Set [mathematical expression] of available actions for each player [mathematical expression]
  • Payoffs: Function [mathematical expression]

Nash Equilibrium

A strategy profile [mathematical expression] is a Nash equilibrium if:

Where [mathematical expression] represents the strategies of all players except player [mathematical expression].

Mixed Strategies

A mixed strategy is a probability distribution over pure strategies:

Expected payoff under mixed strategies:

Evolutionarily Stable Strategy (ESS)

Strategy [mathematical expression] is evolutionarily stable if for all [mathematical expression]:

Rust Implementation

use nalgebra::{DMatrix, DVector};
use std::collections::HashMap;
use itertools::Itertools;
 
/// Represents a strategic game with multiple players.
#[derive(Debug, Clone)]
pub struct StrategicGame {
    /// Number of players
    num_players: usize,
    /// Strategy sets for each player
    strategy_sets: Vec<Vec<String>>,
    /// Payoff matrices for each player
    payoff_matrices: Vec<DMatrix<f64>>,
}
 
impl StrategicGame {
    /// Create a new strategic game.
    ///
    /// # Arguments
    /// * `strategy_sets` - Vector of strategy names for each player
    /// * `payoff_matrices` - Payoff matrices for each player
    pub fn new(
        strategy_sets: Vec<Vec<String>>,
        payoff_matrices: Vec<DMatrix<f64>>
    ) -> Self {
        let num_players = strategy_sets.len();
        assert_eq!(num_players, payoff_matrices.len());
        
        Self {
            num_players,
            strategy_sets,
            payoff_matrices,
        }
    }
 
    /// Find pure strategy Nash equilibria.
    pub fn find_pure_nash_equilibria(&self) -> Vec<Vec<usize>> {
        let mut equilibria = Vec::new();
        
        // Generate all strategy profiles
        let strategy_counts: Vec<usize> = self.strategy_sets.iter()
            .map(|strategies| strategies.len())
            .collect();
        
        let total_profiles = strategy_counts.iter().product::<usize>();
        
        for profile_index in 0..total_profiles {
            let profile = self.index_to_profile(profile_index, &strategy_counts);
            
            if self.is_nash_equilibrium(&profile) {
                equilibria.push(profile);
            }
        }
        
        equilibria
    }
 
    /// Check if a strategy profile is a Nash equilibrium.
    fn is_nash_equilibrium(&self, profile: &[usize]) -> bool {
        for player in 0..self.num_players {
            let current_payoff = self.get_payoff(player, profile);
            
            // Check if player can improve by unilateral deviation
            for alternative_strategy in 0..self.strategy_sets[player].len() {
                if alternative_strategy == profile[player] {
                    continue;
                }
                
                let mut alternative_profile = profile.to_vec();
                alternative_profile[player] = alternative_strategy;
                
                let alternative_payoff = self.get_payoff(player, &alternative_profile);
                
                if alternative_payoff > current_payoff {
                    return false; // Player can improve
                }
            }
        }
        
        true
    }
 
    /// Get payoff for a player given a strategy profile.
    fn get_payoff(&self, player: usize, profile: &[usize]) -> f64 {
        // For simplicity, assume 2-player games with matrix representation
        if self.num_players == 2 {
            self.payoff_matrices[player][(profile[0], profile[1])]
        } else {
            // For n-player games, would need tensor representation
            0.0 // Placeholder
        }
    }
 
    /// Convert linear index to strategy profile.
    fn index_to_profile(&self, mut index: usize, strategy_counts: &[usize]) -> Vec<usize> {
        let mut profile = vec![0; self.num_players];
        
        for (i, &count) in strategy_counts.iter().enumerate().rev() {
            profile[i] = index % count;
            index /= count;
        }
        
        profile
    }
 
    /// Calculate mixed strategy Nash equilibrium for 2-player games.
    pub fn mixed_nash_equilibrium_2p(&self) -> Option<(DVector<f64>, DVector<f64>)> {
        if self.num_players != 2 {
            return None;
        }
        
        let p1_payoffs = &self.payoff_matrices[0];
        let p2_payoffs = &self.payoff_matrices[1];
        
        // For 2x2 games, solve analytically
        if p1_payoffs.nrows() == 2 && p1_payoffs.ncols() == 2 {
            self.solve_2x2_mixed_nash(p1_payoffs, p2_payoffs)
        } else {
            // For larger games, would use linear programming
            None
        }
    }
 
    /// Solve 2x2 mixed strategy Nash equilibrium.
    fn solve_2x2_mixed_nash(
        &self,
        p1_payoffs: &DMatrix<f64>,
        p2_payoffs: &DMatrix<f64>
    ) -> Option<(DVector<f64>, DVector<f64>)> {
        // Player 1's mixed strategy makes Player 2 indifferent
        let p2_expected_0 = p2_payoffs[(0, 0)] - p2_payoffs[(1, 0)];
        let p2_expected_1 = p2_payoffs[(0, 1)] - p2_payoffs[(1, 1)];
        
        if (p2_expected_0 - p2_expected_1).abs() < 1e-10 {
            return None; // No mixed strategy equilibrium
        }
        
        let p1_prob_0 = p2_expected_1 / (p2_expected_1 - p2_expected_0);
        
        // Player 2's mixed strategy makes Player 1 indifferent
        let p1_expected_0 = p1_payoffs[(0, 0)] - p1_payoffs[(0, 1)];
        let p1_expected_1 = p1_payoffs[(1, 0)] - p1_payoffs[(1, 1)];
        
        if (p1_expected_0 - p1_expected_1).abs() < 1e-10 {
            return None;
        }
        
        let p2_prob_0 = p1_expected_1 / (p1_expected_1 - p1_expected_0);
        
        // Check if probabilities are valid
        if p1_prob_0 < 0.0 || p1_prob_0 > 1.0 || p2_prob_0 < 0.0 || p2_prob_0 > 1.0 {
            return None;
        }
        
        let p1_strategy = DVector::from_vec(vec![p1_prob_0, 1.0 - p1_prob_0]);
        let p2_strategy = DVector::from_vec(vec![p2_prob_0, 1.0 - p2_prob_0]);
        
        Some((p1_strategy, p2_strategy))
    }
}
 
/// Evolutionary game dynamics simulation.
pub struct EvolutionaryGameSimulator {
    /// Population size
    population_size: usize,
    /// Strategy proportions
    strategy_proportions: DVector<f64>,
    /// Payoff matrix
    payoff_matrix: DMatrix<f64>,
    /// Mutation rate
    mutation_rate: f64,
}
 
impl EvolutionaryGameSimulator {
    /// Create new evolutionary game simulator.
    pub fn new(
        strategy_proportions: DVector<f64>,
        payoff_matrix: DMatrix<f64>,
        population_size: usize,
        mutation_rate: f64,
    ) -> Self {
        Self {
            population_size,
            strategy_proportions,
            payoff_matrix,
            mutation_rate,
        }
    }
 
    /// Run replicator dynamics for specified iterations.
    pub fn run_replicator_dynamics(&mut self, iterations: usize, dt: f64) -> Vec<DVector<f64>> {
        let mut history = Vec::with_capacity(iterations);
        
        for _ in 0..iterations {
            history.push(self.strategy_proportions.clone());
            
            let fitness = &self.payoff_matrix * &self.strategy_proportions;
            let average_fitness = self.strategy_proportions.dot(&fitness);
            
            // Replicator equation: dx/dt = x(f(x) - φ(x))
            for i in 0..self.strategy_proportions.len() {
                let growth_rate = self.strategy_proportions[i] * 
                    (fitness[i] - average_fitness);
                self.strategy_proportions[i] += dt * growth_rate;
            }
            
            // Normalize to maintain probability distribution
            let sum: f64 = self.strategy_proportions.sum();
            self.strategy_proportions /= sum;
            
            // Apply mutation
            self.apply_mutation();
        }
        
        history
    }
 
    /// Apply random mutations to strategy proportions.
    fn apply_mutation(&mut self) {
        for i in 0..self.strategy_proportions.len() {
            if rand::random::<f64>() < self.mutation_rate {
                let mutation = (rand::random::<f64>() - 0.5) * 0.01;
                self.strategy_proportions[i] = 
                    (self.strategy_proportions[i] + mutation).max(0.0);
            }
        }
        
        // Renormalize
        let sum: f64 = self.strategy_proportions.sum();
        if sum > 0.0 {
            self.strategy_proportions /= sum;
        }
    }
 
    /// Find evolutionarily stable strategies.
    pub fn find_ess(&self) -> Vec<usize> {
        let mut ess_strategies = Vec::new();
        
        for i in 0..self.payoff_matrix.nrows() {
            if self.is_evolutionarily_stable(i) {
                ess_strategies.push(i);
            }
        }
        
        ess_strategies
    }
 
    /// Check if a pure strategy is evolutionarily stable.
    fn is_evolutionarily_stable(&self, strategy: usize) -> bool {
        let mut test_strategy = DVector::zeros(self.payoff_matrix.nrows());
        test_strategy[strategy] = 1.0;
        
        let own_fitness = (&self.payoff_matrix * &test_strategy)[strategy];
        
        for j in 0..self.payoff_matrix.nrows() {
            if j == strategy {
                continue;
            }
            
            let mut mutant_strategy = DVector::zeros(self.payoff_matrix.nrows());
            mutant_strategy[j] = 1.0;
            
            let mutant_fitness = (&self.payoff_matrix * &test_strategy)[j];
            
            if mutant_fitness >= own_fitness {
                return false;
            }
        }
        
        true
    }
}
 
/// Auction theory implementation.
pub struct AuctionAnalyzer {
    /// Number of bidders
    num_bidders: usize,
    /// Valuation distributions (simplified as uniform)
    valuation_bounds: Vec<(f64, f64)>,
}
 
impl AuctionAnalyzer {
    pub fn new(num_bidders: usize, valuation_bounds: Vec<(f64, f64)>) -> Self {
        Self {
            num_bidders,
            valuation_bounds,
        }
    }
 
    /// Calculate optimal bid in first-price sealed-bid auction.
    pub fn first_price_optimal_bid(&self, bidder: usize, valuation: f64) -> f64 {
        let (low, high) = self.valuation_bounds[bidder];
        
        // For uniform distribution and symmetric equilibrium
        let n = self.num_bidders as f64;
        valuation * (n - 1.0) / n
    }
 
    /// Calculate expected revenue for different auction formats.
    pub fn compare_auction_revenues(&self) -> AuctionComparison {
        let n = self.num_bidders as f64;
        
        // Assuming uniform valuations [0, 1] for simplicity
        let first_price_revenue = (n - 1.0) / (n + 1.0);
        let second_price_revenue = (n - 1.0) / (n + 1.0); // Revenue equivalence
        let english_auction_revenue = (n - 1.0) / (n + 1.0);
        let dutch_auction_revenue = (n - 1.0) / (n + 1.0);
        
        AuctionComparison {
            first_price: first_price_revenue,
            second_price: second_price_revenue,
            english: english_auction_revenue,
            dutch: dutch_auction_revenue,
        }
    }
}
 
/// Cooperative game theory: Shapley value calculation.
pub struct CooperativeGameAnalyzer {
    /// Number of players
    num_players: usize,
    /// Characteristic function mapping coalitions to values
    characteristic_function: HashMap<Vec<bool>, f64>,
}
 
impl CooperativeGameAnalyzer {
    pub fn new(num_players: usize) -> Self {
        Self {
            num_players,
            characteristic_function: HashMap::new(),
        }
    }
 
    /// Set coalition value.
    pub fn set_coalition_value(&mut self, coalition: Vec<bool>, value: f64) {
        assert_eq!(coalition.len(), self.num_players);
        self.characteristic_function.insert(coalition, value);
    }
 
    /// Calculate Shapley values for all players.
    pub fn calculate_shapley_values(&self) -> DVector<f64> {
        let mut shapley_values = DVector::zeros(self.num_players);
        
        for player in 0..self.num_players {
            shapley_values[player] = self.shapley_value(player);
        }
        
        shapley_values
    }
 
    /// Calculate Shapley value for specific player.
    fn shapley_value(&self, player: usize) -> f64 {
        let mut total_contribution = 0.0;
        
        // Iterate over all possible coalitions not containing the player
        for coalition_size in 0..self.num_players {
            let coalitions_without_player = self.generate_coalitions_of_size(
                coalition_size, 
                player
            );
            
            for mut coalition in coalitions_without_player {
                let coalition_value = self.get_coalition_value(&coalition);
                
                // Add player to coalition
                coalition[player] = true;
                let coalition_with_player_value = self.get_coalition_value(&coalition);
                
                let marginal_contribution = coalition_with_player_value - coalition_value;
                
                // Weight by coalition size probability
                let weight = self.factorial(coalition_size) * 
                    self.factorial(self.num_players - coalition_size - 1) / 
                    self.factorial(self.num_players);
                
                total_contribution += weight * marginal_contribution;
            }
        }
        
        total_contribution
    }
 
    /// Generate all coalitions of specific size excluding a player.
    fn generate_coalitions_of_size(&self, size: usize, excluded_player: usize) -> Vec<Vec<bool>> {
        let mut coalitions = Vec::new();
        let available_players: Vec<usize> = (0..self.num_players)
            .filter(|&i| i != excluded_player)
            .collect();
        
        if size <= available_players.len() {
            for combination in available_players.iter().combinations(size) {
                let mut coalition = vec![false; self.num_players];
                for &player in combination {
                    coalition[*player] = true;
                }
                coalitions.push(coalition);
            }
        }
        
        coalitions
    }
 
    /// Get coalition value from characteristic function.
    fn get_coalition_value(&self, coalition: &[bool]) -> f64 {
        *self.characteristic_function.get(coalition).unwrap_or(&0.0)
    }
 
    /// Calculate factorial.
    fn factorial(&self, n: usize) -> f64 {
        (1..=n).map(|i| i as f64).product()
    }
}
 
/// Supporting data structures.
 
#[derive(Debug, Clone)]
pub struct AuctionComparison {
    pub first_price: f64,
    pub second_price: f64,
    pub english: f64,
    pub dutch: f64,
}

Practical Applications

Market Competition Analysis

use crate::analytics::prescriptive::game_theory::{StrategicGame};
 
/// Analyze pricing competition between firms.
pub fn analyze_pricing_competition() {
    // Duopoly pricing game: High Price vs Low Price strategies
    let strategies = vec![
        vec!["High".to_string(), "Low".to_string()], // Firm 1
        vec!["High".to_string(), "Low".to_string()], // Firm 2
    ];
    
    // Payoff matrices: (Firm1 profits, Firm2 profits)
    // Firm 1's payoffs when both choose: (High,High), (High,Low), (Low,High), (Low,Low)
    let firm1_payoffs = DMatrix::from_row_slice(2, 2, &[
        10.0, 2.0,  // If Firm 1 chooses High: vs (High, Low)
        15.0, 5.0,  // If Firm 1 chooses Low: vs (High, Low)
    ]);
    
    let firm2_payoffs = DMatrix::from_row_slice(2, 2, &[
        10.0, 15.0, // If Firm 2 chooses High: vs (High, Low)
        2.0, 5.0,   // If Firm 2 chooses Low: vs (High, Low)
    ]);
    
    let game = StrategicGame::new(
        strategies,
        vec![firm1_payoffs, firm2_payoffs],
    );
    
    println!("Pricing Competition Analysis:");
    println!("Pure Strategy Nash Equilibria:");
    
    let equilibria = game.find_pure_nash_equilibria();
    for (i, equilibrium) in equilibria.iter().enumerate() {
        println!("  Equilibrium {}: Firm 1: {}, Firm 2: {}",
                 i + 1,
                 if equilibrium[0] == 0 { "High" } else { "Low" },
                 if equilibrium[1] == 0 { "High" } else { "Low" });
    }
    
    // Check for mixed strategy equilibrium
    if let Some((p1_mixed, p2_mixed)) = game.mixed_nash_equilibrium_2p() {
        println!("\nMixed Strategy Nash Equilibrium:");
        println!("  Firm 1: High={:.3}, Low={:.3}", p1_mixed[0], p1_mixed[1]);
        println!("  Firm 2: High={:.3}, Low={:.3}", p2_mixed[0], p2_mixed[1]);
    }
}

Evolutionary Dynamics in Technology Adoption

/// Model technology adoption using evolutionary game theory.
pub fn technology_adoption_dynamics() {
    // Two technologies competing for market share
    let initial_proportions = DVector::from_vec(vec![0.3, 0.7]); // Tech A: 30%, Tech B: 70%
    
    // Network effects payoff matrix
    let payoff_matrix = DMatrix::from_row_slice(2, 2, &[
        5.0, 1.0,  // Tech A payoffs: vs (A, B) adoption
        2.0, 4.0,  // Tech B payoffs: vs (A, B) adoption
    ]);
    
    let mut simulator = EvolutionaryGameSimulator::new(
        initial_proportions,
        payoff_matrix,
        1000, // Population size
        0.01, // Mutation rate
    );
    
    println!("Technology Adoption Dynamics:");
    println!("Initial state: Tech A: {:.1}%, Tech B: {:.1}%",
             simulator.strategy_proportions[0] * 100.0,
             simulator.strategy_proportions[1] * 100.0);
    
    // Run evolutionary dynamics
    let history = simulator.run_replicator_dynamics(100, 0.1);
    
    println!("Final state: Tech A: {:.1}%, Tech B: {:.1}%",
             simulator.strategy_proportions[0] * 100.0,
             simulator.strategy_proportions[1] * 100.0);
    
    // Analyze convergence
    let last_state = history.last().unwrap();
    let final_state = &simulator.strategy_proportions;
    let convergence = (final_state - last_state).norm();
    
    println!("Convergence metric: {:.6}", convergence);
    
    // Check for evolutionarily stable strategies
    let ess = simulator.find_ess();
    println!("Evolutionarily Stable Strategies: {:?}", ess);
}

Supply Chain Coordination

/// Analyze supply chain coordination using cooperative game theory.
pub fn supply_chain_coordination() {
    let mut analyzer = CooperativeGameAnalyzer::new(3); // Supplier, Manufacturer, Retailer
    
    // Define coalition values (total profit)
    analyzer.set_coalition_value(vec![false, false, false], 0.0);     // Empty coalition
    analyzer.set_coalition_value(vec![true, false, false], 10.0);     // Supplier alone
    analyzer.set_coalition_value(vec![false, true, false], 15.0);     // Manufacturer alone
    analyzer.set_coalition_value(vec![false, false, true], 20.0);     // Retailer alone
    analyzer.set_coalition_value(vec![true, true, false], 40.0);      // Supplier + Manufacturer
    analyzer.set_coalition_value(vec![true, false, true], 45.0);      // Supplier + Retailer
    analyzer.set_coalition_value(vec![false, true, true], 50.0);      // Manufacturer + Retailer
    analyzer.set_coalition_value(vec![true, true, true], 80.0);       // Grand coalition
    
    let shapley_values = analyzer.calculate_shapley_values();
    
    println!("Supply Chain Profit Allocation (Shapley Values):");
    println!("  Supplier:     {:.2}", shapley_values[0]);
    println!("  Manufacturer: {:.2}", shapley_values[1]);
    println!("  Retailer:     {:.2}", shapley_values[2]);
    println!("  Total:        {:.2}", shapley_values.sum());
    
    // Verify efficiency and individual rationality
    let grand_coalition_value = 80.0;
    let individual_values = vec![10.0, 15.0, 20.0];
    
    println!("\nCoalition Properties:");
    println!("  Efficiency: {} (Shapley sum = Grand coalition value)",
             (shapley_values.sum() - grand_coalition_value).abs() < 1e-6);
    
    for (i, &individual_value) in individual_values.iter().enumerate() {
        println!("  Individual Rationality {}: {} (Shapley ≥ Individual)",
                 i + 1, shapley_values[i] >= individual_value);
    }
}

Auction Strategy Optimization

/// Optimize bidding strategies in different auction formats.
pub fn auction_strategy_optimization() {
    let analyzer = AuctionAnalyzer::new(
        5, // 5 bidders
        vec![(0.0, 100.0); 5], // Uniform valuations [0, 100] for all bidders
    );
    
    println!("Auction Strategy Analysis:");
    
    // Analyze optimal bidding for different valuations
    let test_valuations = vec![20.0, 40.0, 60.0, 80.0, 100.0];
    
    println!("\nOptimal First-Price Sealed-Bid Auction Bids:");
    println!("{:<10} {:<15} {:<15}", "Valuation", "Optimal Bid", "Bid/Value Ratio");
    println!("{}", "-".repeat(40));
    
    for valuation in test_valuations {
        let optimal_bid = analyzer.first_price_optimal_bid(0, valuation);
        let ratio = optimal_bid / valuation;
        println!("{:<10.0} {:<15.2} {:<15.3}", valuation, optimal_bid, ratio);
    }
    
    // Compare auction format revenues
    let revenue_comparison = analyzer.compare_auction_revenues();
    
    println!("\nExpected Revenue Comparison:");
    println!("  First-Price:    {:.3}", revenue_comparison.first_price);
    println!("  Second-Price:   {:.3}", revenue_comparison.second_price);
    println!("  English:        {:.3}", revenue_comparison.english);
    println!("  Dutch:          {:.3}", revenue_comparison.dutch);
    
    println!("\nRevenue Equivalence: All formats yield same expected revenue");
}

Strategic Applications

Network Security Games

/// Model cybersecurity investment decisions.
pub fn cybersecurity_investment_game() {
    // Two firms deciding on security investment levels
    let strategies = vec![
        vec!["Low".to_string(), "High".to_string()], // Firm 1 security investment
        vec!["Low".to_string(), "High".to_string()], // Firm 2 security investment
    ];
    
    // Payoffs considering security benefits and investment costs
    // Higher security reduces breach probability but increases costs
    let firm1_payoffs = DMatrix::from_row_slice(2, 2, &[
        5.0,  8.0,  // Low investment: benefits from other's security
        2.0,  6.0,  // High investment: costly but more secure
    ]);
    
    let firm2_payoffs = DMatrix::from_row_slice(2, 2, &[
        5.0,  2.0,  // Symmetric payoffs
        8.0,  6.0,
    ]);
    
    let game = StrategicGame::new(
        strategies,
        vec![firm1_payoffs, firm2_payoffs],
    );
    
    let equilibria = game.find_pure_nash_equilibria();
    
    println!("Cybersecurity Investment Game:");
    for equilibrium in equilibria {
        let firm1_strategy = if equilibrium[0] == 0 { "Low" } else { "High" };
        let firm2_strategy = if equilibrium[1] == 0 { "Low" } else { "High" };
        println!("  Equilibrium: ({}, {})", firm1_strategy, firm2_strategy);
    }
    
    println!("\nAnalysis: Free-riding problem in cybersecurity investment");
}

Resource Allocation Games

/// Model resource competition using congestion games.
pub fn resource_allocation_analysis() {
    // Simplified congestion game: users choosing between two resources
    let initial_distribution = DVector::from_vec(vec![0.6, 0.4]); // 60% on Resource 1
    
    // Cost increases with congestion
    let cost_matrix = DMatrix::from_row_slice(2, 2, &[
        1.0, 2.0,  // Resource 1 costs: vs (low, high) usage
        2.0, 1.0,  // Resource 2 costs: vs (low, high) usage
    ]);
    
    // Convert costs to payoffs (negative costs)
    let payoff_matrix = -cost_matrix;
    
    let mut simulator = EvolutionaryGameSimulator::new(
        initial_distribution,
        payoff_matrix,
        1000,
        0.005, // Low mutation rate
    );
    
    println!("Resource Allocation Dynamics:");
    println!("Initial: Resource 1: {:.1}%, Resource 2: {:.1}%",
             simulator.strategy_proportions[0] * 100.0,
             simulator.strategy_proportions[1] * 100.0);
    
    let _history = simulator.run_replicator_dynamics(200, 0.05);
    
    println!("Equilibrium: Resource 1: {:.1}%, Resource 2: {:.1}%",
             simulator.strategy_proportions[0] * 100.0,
             simulator.strategy_proportions[1] * 100.0);
    
    // Analyze efficiency loss (Price of Anarchy)
    let social_optimum_usage = 0.5; // Balanced usage minimizes total cost
    let actual_usage = simulator.strategy_proportions[0];
    let efficiency_loss = (actual_usage - social_optimum_usage).abs();
    
    println!("Efficiency loss from Nash equilibrium: {:.3}", efficiency_loss);
}

Advanced Concepts

Mechanism Design

/// Vickrey-Clarke-Groves (VCG) auction implementation.
pub struct VCGAuction {
    num_items: usize,
    bidder_valuations: Vec<DVector<f64>>,
}
 
impl VCGAuction {
    pub fn new(bidder_valuations: Vec<DVector<f64>>) -> Self {
        let num_items = if !bidder_valuations.is_empty() {
            bidder_valuations[0].len()
        } else {
            0
        };
        
        Self {
            num_items,
            bidder_valuations,
        }
    }
 
    /// Determine optimal allocation and VCG payments.
    pub fn run_auction(&self) -> (Vec<Vec<bool>>, Vec<f64>) {
        let num_bidders = self.bidder_valuations.len();
        
        // Find welfare-maximizing allocation
        let allocation = self.find_optimal_allocation();
        
        // Calculate VCG payments
        let mut payments = vec![0.0; num_bidders];
        
        for bidder in 0..num_bidders {
            // Social welfare without this bidder
            let welfare_without = self.max_welfare_excluding_bidder(bidder);
            
            // Other bidders' welfare in the chosen allocation
            let others_welfare = self.calculate_others_welfare(&allocation, bidder);
            
            payments[bidder] = welfare_without - others_welfare;
        }
        
        (allocation, payments)
    }
 
    /// Find allocation that maximizes social welfare.
    fn find_optimal_allocation(&self) -> Vec<Vec<bool>> {
        // Simplified: assume single-item auction
        let num_bidders = self.bidder_valuations.len();
        let mut allocation = vec![vec![false; self.num_items]; num_bidders];
        
        for item in 0..self.num_items {
            let mut best_bidder = 0;
            let mut best_value = self.bidder_valuations[0][item];
            
            for bidder in 1..num_bidders {
                if self.bidder_valuations[bidder][item] > best_value {
                    best_value = self.bidder_valuations[bidder][item];
                    best_bidder = bidder;
                }
            }
            
            allocation[best_bidder][item] = true;
        }
        
        allocation
    }
 
    /// Calculate maximum welfare excluding specific bidder.
    fn max_welfare_excluding_bidder(&self, excluded_bidder: usize) -> f64 {
        let mut total_welfare = 0.0;
        
        for item in 0..self.num_items {
            let mut best_value = 0.0;
            
            for bidder in 0..self.bidder_valuations.len() {
                if bidder != excluded_bidder {
                    best_value = best_value.max(self.bidder_valuations[bidder][item]);
                }
            }
            
            total_welfare += best_value;
        }
        
        total_welfare
    }
 
    /// Calculate welfare of other bidders given allocation.
    fn calculate_others_welfare(&self, allocation: &[Vec<bool>], excluded_bidder: usize) -> f64 {
        let mut others_welfare = 0.0;
        
        for bidder in 0..self.bidder_valuations.len() {
            if bidder != excluded_bidder {
                for item in 0..self.num_items {
                    if allocation[bidder][item] {
                        others_welfare += self.bidder_valuations[bidder][item];
                    }
                }
            }
        }
        
        others_welfare
    }
}

Game theory provides essential frameworks for analyzing strategic interactions in competitive business environments, enabling optimal decision-making in scenarios ranging from pricing competition to resource allocation and cooperative partnerships.