ECO 211 Chapter Notes - Chapter 13: Game Theory, Game Tree, Strategic Dominance
15 Nov 2016
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ECO 211 Full Course Notes
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Game theory--the study of strategic interactions in which the payoffs of one agent depend on the actions of themselves & others. Three key elements of any game: the players, the strategies, the payoffs. Strategies--comprise a complete plan describing how a player will act. Payoff matrix--represents the payoffs for each action players can take. One player"s actions are read across in rows, the other"s in columns. First number listed is the payoff to the row player, second is to the column player. In prisoner"s dilemma, decide between confessing & not confessing & aim for lowest number of years in prison. Simultaneous move game--players pick their actions at the same time (no knowing other person"s choice) This assumes you know the payoffs for both situations for both people. You pick one player and hold them at each option, choosing the one that gets you best payoff (in this case, fewer years in jail)
