(FORTUNE Magazine) – It's not every day you get to say to a Nobel prize winner: You read it here first. But Reinhard Selten, the German economist from the University of Bonn who was one of the three winners of this year's Nobel in economics, awarded for work in game theory, says he first met with the subject in 1949 when, as a 19-year-old student, he picked up a copy of FORTUNE and read an article by John McDonald titled "A Theory of Strategy." "I remember how impressed I was by the existence of the theory, even without much knowledge of what it was," says Selten. "It gave me interest in the subject and got me to the library to get the von NeumannMorgenstern book ((the original work on game theory))." Game theory is essentially a way of modeling how people behave. Unlike classical economics, which assumes perfect competition and many participants, game theory looks at the interactions of a few players, analyzing how they compete and cooperate. From those observations are derived novel ways to win. The mathematical underpinnings are daunting -- McDonald called game theory "more subtle than a Jesuit" -- but 45 years after Selten read that article in Fortune, game theory is finding a place in the real world. One prominent example is the FCC auction of radio bandwidths to take place in December. Game theorists helped the FCC set up the auction rules, and corporate bidders are retaining game theorists of their own to help them work out optimal bidding strategies. But not all competitions are so well thought out and controlled. Yale School of Management professor and game theorist Barry Nalebuff thinks this season's baseball strike might have been averted had team owners understood game theory. The strike occurred when the owners insisted on a salary cap, which the players vehemently opposed, to go with a pooled revenue plan. But what the owners failed to realize was that the revenue-sharing plan alone, if accepted, would have obviated the need for a salary cap, a measure intended to curtail bidding wars for players. Why? "All owners would have the same objective," says Nalebuff -- maximizing the league's total revenues. "The best players would go to the teams that can generate the most revenue with them." If only Selten had won the Nobel prize a few months earlier. --J.A.