Game Theory In Action: An Introduction To Class...

This course is an introduction to game theory and strategic thinking. Ideas such as dominance, backward induction, Nash equilibrium, evolutionary stability, commitment, credibility, asymmetric information, adverse selection, and signaling are discussed and applied to games played in class and to examples drawn from economics, politics, the movies, and elsewhere.

Game Theory in Action: An Introduction to Class...

Who should take this course?This course is an introduction to game theory. Introductory microeconomics (115 or equivalent) is required. Intermediate micro (150/2) is not required, but it is recommended. We will use calculus (mostly one variable) in this course. We will also refer to ideas like probability and expectation. Some may prefer to take the course next academic year once they have more background. Students who have already taken Econ 156b should not enroll in this class.

Course Aims and Methods.Game theory is a way of thinking about strategic situations. One aim of the course is to teach you some strategic considerations to take into account making your choices. A second aim is to predict how other people or organizations behave when they are in strategic settings. We will see that these aims are closely related. We will learn new concepts, methods and terminology. A third aim is to apply these tools to settings from economics and from elsewhere. The course will emphasize examples. We will also play several games in class.

Popularized by movies such as "A Beautiful Mind," game theory is the mathematical modeling of strategic interaction among rational (and irrational) agents. Beyond what we call `games' in common language, such as chess, poker, soccer, etc., it includes the modeling of conflict among nations, political campaigns, competition among firms, and trading behavior in markets such as the NYSE. How could you begin to model keyword auctions, and peer to peer file-sharing networks, without accounting for the incentives of the people using them? The course will provide the basics: representing games and strategies, the extensive form (which computer scientists call game trees), Bayesian games (modeling things like auctions), repeated and stochastic games, and more. We'll include a variety of examples including classic games and a few applications.

It is called game theory since the theory tries to understand the strategic actions of two or more "players" in a given situation containing set rules and outcomes. While used in several disciplines, game theory is most notably used as a tool within the study of business and economics.The "games" may involve how two competitor firms will react to price cuts by the other, whether a firm should acquire another, or how traders in a stock market may react to price changes. In theoretic terms, these games may be categorized as prisoner's dilemmas, the dictator game, the hawk-and-dove, and Bach or Stravinsky."}},"@type": "Question","name": "What Are Some of the Assumptions About These Games?","acceptedAnswer": "@type": "Answer","text": "Like many economic models, game theory also contains a set of strict assumptions that must hold for the theory to make good predictions in practice. First, all players are utility-maximizing rational actors that have full information about the game, the rules, and the consequences. Players are not allowed to communicate or interact with one another. Possible outcomes are not only known in advance but also cannot be changed. The number of players in a game can theoretically be infinite, but most games will be put into the context of only two players.","@type": "Question","name": "What Is a Nash Equilibrium?","acceptedAnswer": "@type": "Answer","text": "The Nash equilibrium is an important concept referring to a stable state in a game where no player can gain an advantage by unilaterally changing a strategy, assuming the other participants also do not change their strategies. The Nash equilibrium provides the solution concept in a non-cooperative (adversarial) game. It is named after John Nash who received the Nobel Prize in 1994 for his work.","@type": "Question","name": "Who Came Up with Game Theory?","acceptedAnswer": "@type": "Answer","text": "Game theory is largely attributed to the work of mathematician John von Neumann and economist Oskar Morgenstern in the 1940s and was developed extensively by many other researchers and scholars in the 1950s. It remains an area of active research and applied science to this day."]}]}] Investing Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Economy Government Policy Monetary Policy Fiscal Policy View All Personal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All News Markets Companies Earnings Economy Crypto Personal Finance Government View All Reviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard EconomyEconomy Government Policy Monetary Policy Fiscal Policy View All Personal FinancePersonal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All NewsNews Markets Companies Earnings Economy Crypto Personal Finance Government View All ReviewsReviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All Financial Terms Newsletter About Us Follow Us Facebook Instagram LinkedIn TikTok Twitter YouTube Table of ContentsExpandTable of ContentsWhat Is Game Theory?How It WorksUseful TermsThe Nash EquilibriumImpact of Game TheoryTypes of Game TheoriesExamplesStrategiesLimitationsGame Theory FAQsThe Bottom LineEconomicsBehavioral EconomicsGame TheoryBy

According to game theory, the actions and choices of all the participants affect the outcome of each. It's assumed players within the game are rational and will strive to maximize their payoffs in the game.

Game theory exists in almost every facet of life. Because the decisions of other people around you impact your day, game theory pertains to personal relationships, shopping habits, media intake, and hobbies.

It is called game theory since the theory tries to understand the strategic actions of two or more "players" in a given situation containing set rules and outcomes. While used in several disciplines, game theory is most notably used as a tool within the study of business and economics.

Like many economic models, game theory also contains a set of strict assumptions that must hold for the theory to make good predictions in practice. First, all players are utility-maximizing rational actors that have full information about the game, the rules, and the consequences. Players are not allowed to communicate or interact with one another. Possible outcomes are not only known in advance but also cannot be changed. The number of players in a game can theoretically be infinite, but most games will be put into the context of only two players.

Economists and others who interpret game theory in terms of RPT shouldnot think of game theory as in any way an empirical account of themotivations of some flesh-and-blood actors (such as actual people).Rather, they should regard game theory as part of the body ofmathematics that is used to model those entities (which might or mightnot literally exist) who consistently select elements from mutuallyexclusive action sets, resulting in patterns of choices, which,allowing for some stochasticity and noise, can be statisticallymodeled as maximization of utility functions. On this interpretation,game theory could not be refuted by any empirical observations, sinceit is not an empirical theory in the first place. Of course,observation and experience could lead someone favoring thisinterpretation to conclude that game theory is of little helpin describing actual human behavior.

All situations in which at least one agent can only act to maximizehis utility through anticipating (either consciously, or justimplicitly in his behavior) the responses to his actions by one ormore other agents is called a game. Agents involved in gamesare referred to as players. If all agents have optimalactions regardless of what the others do, as in purely parametricsituations or conditions of monopoly or perfect competition (see Section 1 above) we can model this without appeal to game theory; otherwise, weneed it. 041b061a72