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gametheory - Game Theory Definitions • Game A formal...

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Unformatted text preview: Game Theory Definitions • Game: A formal model of a social situation where each participant is rational and realizes that the welfare of each person depends on the actions of the others. Participants are called players. If the situation is such that in order to determine how to best play the game a player has to guess what the other players will do, then it is called a ‘strategic situation’. • Game Theory: a set of mathematical tools used to analyze games. • Two Branches of Game Theory – cooperative : Players can agree on the strategy each will play and can write binding agreements that guarantee each behaves as promised, i.e., each ‘cooperates’. – noncooperative: binding agreements are not possible. Description of a Game A game (in ‘noncooperative’ game theory) is fully described by identifying • The Players (‘2-player games’ are the easiest to analyze.) • The Actions (or moves) available to each player • The timing of actions of each player. e.g., if players move sequentially (‘sequential’ or ‘dynamic’The timing of actions of each player....
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