This paper generalises the treatment of compositional game theory as introduced by Ghani et al. in 2018, where games are modelled as morphisms of a symmetric monoidal category. From an economic modelling perspective, the notion of a game in the work by Ghani et al. is not expressive enough for many applications. This includes stochastic environments, stochastic choices by players, as well as incomplete information regarding the game being played. The current paper addresses these three issues all at once.

Game theory is used by all behavioral sciences, but its development has long centered around the economic interpretation of equilibrium outcomes in relatively simple games and toy systems. But game theory has another potential use: the high-level design of large game compositions that express complex architectures and represent real-world institutions faithfully. Compositional game theory, grounded in the mathematics underlying programming languages, and introduced here as a general computational framework, increases the parsimony of game representations with abstraction and modularity, accelerates search and design, and helps theorists across disciplines express real-world institutional complexity in well-defined ways. Relative to existing approaches in game theory, compositional game theory is especially promising for solving game systems with long-range dependencies, for comparing large numbers of structurally related games, and for nesting games into the larger logical or strategic flows typical of real world policy or institutional systems.

The analysis of games played on graph-like structures is of increasing importance due to the prevalence of social networks, both virtual and physical, in our daily life. As well as being relevant in computer science, mathematical analysis and computer simulations of such distributed games are vital methodologies in economics, politics and epidemiology, amongst other fields. Our contribution is to give compositional semantics of a family of such games as a well-behaved mapping, a strict monoidal functor, from a category of open graphs (syntax) to a category of open games (semantics). As well as introducing the theoretical framework, we identify some applications of compositionality.