Game Theory
short
What a "Game" means in Game Theory.
Rivalry is direct. In "Zero-Sum" games you win just what the other guy loses. Economic market games are often non-zero sum. Noncooperative often. Oligopolistic.
Who needs to study Game Theory?
We will do two-person games in this course.
Pa yoff M a trix R a nd D Pro g ra m s
Ba rkle y's Pro fit $4 m illion
Ba rkley's p rofit $3 m illion
Ba rkley's p rofit $3 m illion
Ba rkley's p rofit $2 m illion
Allied 's p rofit $3 m illio n
Allied 's p rofit $2 m illio n
Allied 's p rofit$4 m illio n
Allied ' s p rofit $3 m illio n
Stra te g y 1 Stra te g y 2
Ba rkle y
Stra te g y A
Stra te g y B
Allie d
Nash Equilibrium:
A set of strategies such that each player believes accurately that he is doing the best he can given the strategy of the other player.
Nash as a young man
Nash as a Nobel Prize Winner
The book and the Oscar-winning movie.
BarkleyA B
Allied I
II
Ba rkley's Profit $4 m illion
Ba rkley's p rofit $3 m illion
Ba rkley's p rofit $3 m illion
Ba rkley's p rofit $4 m illion
Allied 's p rofit $3 m illio n
Allied 's p rofit $2 m illio n
Allied 's p rofit$4 m illio n
Allied ' s p rofit $3 m illio n
Stra te g y 1 Stra te g y 2
Ba rkle y
Stra te g y A
Stra te g y B
Allie d
Pa yo ff M a trix: No Dom ina nt Stra teg y fo r Ba rkle y
Applications of Game Theory outside of economics:
Prisoner's Dilemma MAD our historical Cold War policy on nuclear attack missiles and our defensive system.
Does Cheating Pay?
Before Most-favored Customer Clause
After Most-Favored Customer Clause
Walmart Case: Preemptive strategies.
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