ECON 101 Lecture Notes - Lecture 17: Best Response, Military Strategy, Marginal Utility

• School: U of M
• Department: Economics
• Course: ECON 101
• Professor: Benjamin Zamzow

Document Summary

Game theory is the study of strategic interactions. Strategic interaction: when your best choice depends on what others choose, and their best choice depends on what you choose. Both collaboration and competition involve strategic interactions. Strategic interactions are a pervasive feature of life. Games: tic tac toe, checkers, chess, football. International relations: military strategy depends on how enemies and allies respond. Business interactions: whether to cut prices depends on how competitors respond. Political interactions: whether to vote for legislation depends on whether others vote for it. Social interactions: whether to go to a party depends on whether your friends go. Four steps for making good strategic decisions. Payoff table: a table which lists your choices in each row, and the other player"s choices in each column. Shows all possible outcomes (in a two-player game) Payoffs for each possible outcome are listed in each cell. Strategic interactions create an infinite regress problem.