Game theory
Two main categories of games: simultaneous and sequential. Games can be one/repeated, co-
operative/non-cooperative. The amount of info in a game can affect its outcome.
The idea of game theory
Game theory is a technique used to analyse situations where for two or more people, the
outcome of an action by one of them depends on their action as well as those taken by the
other.
Strategic game – a scenario where for two or more people, their choice of action/behaviour
has an impact on others.
Strategic interdependence - strategies will depend on expectations about what the other party
is doing. Players need to take into account the possible actions of their counterparties when
they make their own decisions.
Describing strategic games
Games are defined in terms of their rules. The rules incorporate information about players,
their knowledge of the game, possible moves/actions and payoffs. A payoff that represents
more utility will be preferred to one that represents less.
Players acting rationally choose strategies to maximise their payoffs. But because of the
interdependence, a player’s best strategy will depend on what they think the other players are
likely to do.
Simultaneous games
Players make moves at the same time. Players therefore need to formulate strategies on the
basis of what they think the other players will do.
Pure conflict/zero sum games – one player wins and the other loses (one player’s gain is the
other’s loss). (GoC)
Mixed motive games – games which have some scope for mutual gain through co-
ordination/assurance. There are therefore mutually beneficial/harmful outcomes so that there
are shared objectives. (PD, Stag-hunt)
Mixed strategy – a mix of pure strategies determined by a randomisation procedure e.g.
throwing a dice.
Sequential games
Players make moves in some sort of order e.g. one player moves first then the other player
sees this and responds e.g. Chess.
The best way to analyse these games is through game tress.
Repetition
