Game Theory Overview

Game Theory Focus

• The study of strategic decision-making in situations where multiple players interact.
• Emphasizes how players' choices influence the outcomes for both themselves and their opponents.

Game Theory Concepts

• Rationality: Players are assumed to act in their self-interest, seeking to maximize their gains.
• Information: Players may have complete, incomplete, or perfect information about the game and their opponents' strategies.
• Payoffs: The outcomes of each player's choices, expressed numerically or in other measurable terms.
• Strategies: The plans of action that players choose to employ.
• Equilibrium: A state where no player can improve their outcome by unilaterally changing their strategy, assuming the other players' strategies remain the same.

Player Strategy Definition

• A complete plan of action that specifies what a player will do in every possible circumstance of the game.

Dominant Strategy

• A strategy that yields the best outcome for a player regardless of the strategies chosen by other players.

Prisoner's Dilemma

• Two suspects are arrested for a crime.
• Each suspect is offered a deal: confess and implicate the other, or stay silent.
• The suspects are held in separate cells and cannot communicate.
• Outcomes:
  • If both confess, they both receive a moderate sentence.
  • If both stay silent, they both receive a light sentence.
  • If one confesses and the other stays silent, the confessor goes free, and the silent suspect receives a harsh sentence.
• Rationality: If each individual acts in their own self-interest, they will choose to confess, as they are better off even if their partner remains silent.
• Dilemma: The optimal outcome for both players is for them to stay silent. However, because they cannot communicate and fear the worst-case scenario, they both end up confessing and receive a worse outcome.

Test your knowledge on the fundamental concepts of game theory. This quiz covers essential topics such as strategic games, dominant strategies, and classic dilemmas like the Prisoner's Dilemma. Challenge yourself to see how well you understand this complex yet fascinating field.