Game Theory

Unit 3

GAME THEORY

Lesson 25

Learning Objective:

This chapter aims at showing you • • • How games can be analyzed; How games can be related to numbers To demonstrate the theory of a representative collection of [mathematical] games games.

• To show how new games can be investigated and related to other

Hello students, In this course I will give an overview into methods for `solving games' as well as give examples for how games are used to model various scenarios.

Let us begin with the introduction of game theory

What is game theory?

Game theory is the study of how optimal strategies are formulated in conflict. It is concerned with the requirement of decision making in situations where two or more rational opponents are involved under conditions of competition and conflicting interests in anticipation of certain outcomes over a period of time. You are surely aware of the fact that In a competitive environment the strategies taken by the opponent organizations or individuals can dramatically affect the outcome of a particular decision by an organization.

In the automobile industry, for example, the strategies of competitors to introduce certain models with certain features can dramatically affect the profitability of other carmakers. So in order to make important decisions in business, it is necessary to consider what other organizations or individuals are doing or might do. Game theory is a way to consider the impact of the strategies of one, on the strategies and outcomes of the other. In this you will determine the rules of rational behavior in the game situations, in which the outcomes are dependent on the actions of the interdependent players. A GAME refers to a situation in which two or more players are competing. It involves the players (decision makers) who have different goals or objectives. They are in a situation in which there may be a number of possible outcomes with different values to them. Although they might have some control...