Essays /

Notes 1 Introduction To Game Essay

Essay preview

Introduction to Game Theory

Fall 2012

1 / 18

What is game theory?
Robert J. Aumann, 1985: Brie y put, game and economic theory are concerned with the interactive behavior of Homo rationalis | rational man. . . [An] important function of game theory is the classi cation of interactive decision situations.

Roger B. Myerson, 1991: Game theory can be de ned as the study of mathematical models of con ict and cooperation between
intelligent rational decision-makers. Game theory provides general mathematical techniques for analyzing situations in which two or more individuals make decisions that will in uence one another's welfare. Nobel Prize Citation, 1994: Game theory is a mathematical

method for analysing strategic interaction.

Problem
What is strategic interaction?
(Singapore Management University)

Introduction to Game Theory

Fall 2012

2 / 18

An Example of a Game | Flat Tire

Two SMU students, Al and Bob, very con dent about their midterm exam performance in ECON 206, decided to attend a party the weekend before the nal exam. The party was so good that they overslept the whole Sunday. Instead of taking the nal unprepared on Monday, they pleaded the professor to give them a make-up exam. Their excuse was a at tire without a spare and any help. The professor, surprisingly, agreed. On Tuesday morning, the professor placed them in separated rooms and handed them the test. The test had just one question:

\Which tire?"......

(Singapore Management University)

Introduction to Game Theory

Fall 2012

3 / 18

The GPA Rat Race

All of you are now enrolled in ECON 206 that will be graded on a curve. No matter how well you do in absolute terms, only 33.3% of the students will get A's, and only 33.3% of the students will get B's. Therefore, you must work hard, not just in absolute terms, but relative to how hard your classmates work.

All of you are smart enough to recognize this, and after the rst lecture you all hold a secrete meeting where all of you agree not to work too hard.
What will happen in the end?

(Singapore Management University)

Introduction to Game Theory

Fall 2012
...

Read more

Keywords

-2 -4 -5 0 1 10 100 11 110 12 13 14 15 16 17 18 1985 1991 1994 2 2012 206 3 30 33.3 4 5 6 7 8 9 abl absolut accept actual advantag advisor agre al alic also altern amd amount analys analyz anim anoth anticip appar appli applic approach appropri arisen assign asymmetr attend auction aumann b balanc bank bargain base basic bayesian baysian becom behav behavior behind bertrand bi bi-matrix bid bidder bill biolog block bob bomb break brie build busi buy captur case case-bas cation cell characterist charg chase choic choos chosen cient circuit citat citi classi classmat clear collus column common compani compet competit complet comput con concern confess connect consid construct consum cont convict cooper correspond cost cournot cours cpu cpus crime criterion curv day de deal decid decis decision-mak defend deni dent depend detect develop di dilemma disciplin display disutil dollar domin dramat dynam e econ econom end enough enrol equilibria equilibrium er erc ere erenc etc even everi evid exam exampl excus exibl expend extens extensive-form fail fall finit firm flat folk follow form free function gain game gazell general get give go goe good gpa grade group grove guarante hand happen hard hardheart held help high higher highest hold homework homo howev huge ict import incent inclus incomplet increas individu inform innov instead integ intel intellig interact interpret introduct j japan japanes john keep key kindheart know late lectur lesli less level lion lower major make make-up maker makeup man manag mani mathemat matrix matter may mean meet method midterm might mix model monday money morn must myerson nal nash nds ned net neumann never nite nobel normal normal-form note noth number o one oppon ort outlin overslept pace part parti pass pay payment payo pcs peacock perfect perform physic place player plead polic polit posit previous price principl prison prize pro problem product professor protect provid purchas purpos put question r race rank rat ration rationali rationaliz reason receiv recogn refund regret relat relev remain repeat repetit repres respect result rigid robert roger room row rst rule run scheme scienc score second secret select sell separ sequenti serv set she/he shirk signal silent singapor situat slacken slipperi slope smart smu solut sometim somewher spare specifi spectacular speed stackelberg start static stay store stori stot strateg strategi strategic-form student studi su subgam subgame-perfect success sum sunday sure surpris suspect tabl tail take target techniqu term test theorem theori therefor think though three time tire togeth tragedi tree truth tuesday turn two uenc unchang under univers unnecessari unprepar upon us util various von vs war wast way weekend welfar well whoever whole will willing win wish within without work world wors would y year