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Game Theory

Game theory is a branch of mathematics and economics that studies how individuals make decisions in strategic situations where the outcome depends on others' choices. It provides a framework to analyze interactions among rational decision-makers considering incentives, preferences, and potential outcomes. Key concepts include players, strategies, payoffs, normal form games, strategic dominance, Nash equilibrium, extensive form games, and cooperative game theory.

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25 views1 page

Game Theory

Game theory is a branch of mathematics and economics that studies how individuals make decisions in strategic situations where the outcome depends on others' choices. It provides a framework to analyze interactions among rational decision-makers considering incentives, preferences, and potential outcomes. Key concepts include players, strategies, payoffs, normal form games, strategic dominance, Nash equilibrium, extensive form games, and cooperative game theory.

Uploaded by

reachudayc
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as TXT, PDF, TXT or read online on Scribd
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Game theory is a branch of mathematics and economics that studies how individuals,

known as players, make decisions in strategic situations where the outcome of their
actions depends on the choices of others. It provides a framework for analyzing
interactions among rational decision-makers, considering their incentives,
preferences, and potential outcomes.

Here's an introduction to some key concepts in game theory:

Players: Game theory involves two or more players, each of whom makes decisions
that affect the outcomes of the game. Players can be individuals, organizations, or
even nations.

Strategies: A strategy is a complete plan of action that a player chooses to


achieve their objectives in the game. Players select strategies based on their
beliefs about the strategies chosen by other players and their expected payoffs.

Payoffs: Payoffs represent the outcomes or rewards that players receive based on
the combination of strategies chosen by all players. Payoffs can be in the form of
utility, money, or any other measure of benefit or satisfaction.

Normal Form Games: In a normal form game, players simultaneously choose their
strategies without knowing the choices of other players. The payoff to each player
depends on the combination of strategies chosen by all players.

Strategic Dominance: A strategy is said to be strategically dominant if it always


provides a higher payoff to a player regardless of the strategies chosen by other
players. Dominant strategies are often used to predict the likely outcomes of a
game.

Nash Equilibrium: A Nash equilibrium is a set of strategies, one for each player,
such that no player has an incentive to unilaterally deviate from their chosen
strategy, given the strategies chosen by other players. In other words, each
player's strategy is optimal given the strategies chosen by the other players.

Extensive Form Games: In an extensive form game, players make decisions


sequentially, represented by a game tree that shows the sequence of actions and the
possible outcomes at each decision point. Extensive form games are useful for
modeling dynamic interactions and strategic moves over time.

Cooperative Game Theory: Cooperative game theory focuses on situations where


players can form coalitions and negotiate binding agreements to achieve mutual
benefits. It studies how players can distribute the gains from cooperation among
themselves in a fair and stable manner.

Game theory has applications in various fields, including economics, political


science, biology, computer science, and psychology. It is used to analyze strategic
interactions in markets, auctions, negotiations, voting systems, military
conflicts, and social networks, among other areas. By providing insights into
decision-making processes and predicting the likely outcomes of strategic
interactions, game theory helps individuals and organizations make better-informed
decisions in complex and competitive environments.

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