Introduction to Game Theory

Solution concepts

prescriptions or predictions about the outcomes of games

Noncooperative Game Theory

A framework that treats strategic settings as games in the everyday sense of the word -treats all of the agents' actions as individual actions

Normal Form

a game in normal form, consists of a set of players, 1, 2...n, strategy spaces for the players, S1, S2.... Sn, and payoff functions for the players, u1, u2...un

Mixed Strategy

act of selecting a strategy according to a probability distribution

strategy

complete contingent plan (full specification of a player's behavior at each information set) for a player in the game

Interdependence

one person's behavior affects another person's well-being, positively or negatively (situations of interdependence are called strategic settings because, in order for a person to decide how best to behave , he must consider how others around him choose their actions)

Belief

player's assessment about the strategies of the others in the game (use probabilities as a precise way of representing a player's beliefs)

Dominance

strategy si is dominated by strategy sj, and thus si should never be played by a rational player

Cooperative Game Theory

the cooperative framework treats the agents' actions as joint actions (study of contractual relations)

Best response

to maximize the payoff you expect to obtain-which we assume is the mark of rational behavior-you should select the strategy that yields the greatest expected payoff against your belief