TAILIEUCHUNG - Lectures Note on Game Theory

There are many types of games, board games, card games, video games, field games (. football), etc. • In this course, our focus is on games where: – There are 2 or more players. – There is some choice of action where strategy matters. – The game has one or more outcomes, . someone wins, someone loses. – The outcome depends on the strategies chosen by all players; there is strategic interaction. • What does this rule out? – Games of pure chance, . lotteries, slot machines. (Strategies don't matter). – Games without strategic interaction between players, . Solitaire. .Why. | What is a Game There are many types of games board games card games video games field games . football etc. In this course our focus is on games where - There are 2 or more players. - There is some choice of action where strategy matters. - The game has one or more outcomes . someone wins someone loses. - The outcome depends on the strategies chosen by all players there is strategic interaction. What does this rule out - Games of pure chance . lotteries slot machines. Strategies don t matter . - Games without strategic interaction between players . Solitaire. Why Do Economists Study Games Games are a convenient way in which to model the strategic interactions among economic agents. Many economic issues involve strategic interaction. - Behavior in imperfectly competitive markets . Coca-Cola versus Pepsi. - Behavior in auctions . Investment banks bidding on . Treasury bills. - Behavior in economic negotiations . trade. Game theory is not limited to Economics. Five Elements of a Game 1. The players - how many players are there - does nature chance play a role 2. A complete description of what the players can do the set of all possible actions. 3. The information that players have available when choosing their actions 4. A description of the payoff consequences for each player for every possible combination of actions chosen by all players playing the game. 5. A description of all players preferences over .

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