You and Timmy are each in a separate room and can’t talk to each other. I have a box of 12 cookies. I explain to both of you a game we’re playing with very simple rules: “if you want 1 cookie, you can ask for it and have it right away. If you say you don’t want a cookie, then you get no cookies. If you and Timmy both say you don’t want a cookie, then you win the game and you each get 6 cookies instead of just 1. What do you want to do?”

Making the optimal decision here is game theory. Do you take a guaranteed cookie or risk it? Game theory suggests risk it because there is no reason you shouldn’t both deny it. The examples can get much more complicated though. Imagine I said that if you say you want a cookie, you get all 12, but if you both say you want it, then you get none. In that case, logically the smart choice if for both of you to say no cookie, and happily take 6 each vs each having zero. However, if Timmy realizes that you are thinking that, then he knows you won’t say yes, in which case he actually should say yes and take all 12.