Lect01_Slides

Lect01_Slides - What is a Game? There are many types of...

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What is a Game? • There are many types of games, board games, card games, video games, field games (e.g. football), etc. We focus on games where: – There are 2 or more players . – There is some choice of action where strategy matters. gy – The game has one or more outcomes , e.g., 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, e.g., bingo, slot machines. (Strategies don't matter). ames without strategic interaction between players e g – Games without strategic interaction between players, e.g., Solitaire.
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Why Do Economists Study Games? • Games are a convenient way in which to model strategic interactions among economic agents. •M a n y economic issues involve strategic interaction. ehavior in imperfectly competitive markets, Behavior in imperfectly competitive markets, e.g. Coca-Cola versus Pepsi. – Behavior in auctions, e.g. when to bid in dynamic internet auctions. – Behavior in economic negotiations, e.g. trade. • Game theory is not limited to Economics.
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Three Elements of a Game: he layers 1. The players – how many players are there? t / h l l ? does nature/chance play a role? 2. A complete description of the strategies of hl each player 3. A description of the consequences f f ) h l f (payoffs) for each player for every possible profile of strategy choices of all layers players.
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Illustration: The Prisoner’s Dilemma Game • Two players, “prisoners” 1, 2. • Each is questioned by detectives separately and without communication. • Each has two strategies. – Prisoner 1: Don't Confess, Confess – Prisoner 2: Don't Confess, Confess – Payoff consequences quantified in prison years (negative numbers): fewer years (less negative payoffs) =greater satisfaction. – In strategic/normal form game depiction, Prisoner 1 payoff first, followed by professor 2 payoff.
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risoners’ ilemma Game Prisoners Dilemma Game in “Normal” or “Strategic” Form i 2 S t t i Prisoner 2’s Strategies Don't Confess Confess Don't -1 , -1 -15 , 0 Prisoner 1’s Strategies Confess onfess 5 Confess 0 , -15 -5 , -5
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Dilbert Illustration http://www.gametheory.net/media/Dilbert.wmv
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Prisoners' Dilemma Game “ xtensive” Form in Extensive Form Prisoner 1 This line represents a constraint on the Don't onfess Confess information that Prisoner 2 has available. While Prisoner 2 moves second, she does not know what i 1h h Confess Prisoner 2 Prisoner 2 Prisoner 1 has chosen.
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This note was uploaded on 12/26/2011 for the course ECON 171 taught by Professor Charness,g during the Fall '08 term at UCSB.

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Lect01_Slides - What is a Game? There are many types of...

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