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Essential Features of Game Theory

Game theory is a body of knowledge that studies decision making where rational opponents have conflicting interests. It analyzes situations involving two or more players by considering the choices available to each. The goal is for each player to select the best strategy given the other players' possible choices. Game theory provides a scientific approach to rational decision making in competitive scenarios.

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66 views

Essential Features of Game Theory

Game theory is a body of knowledge that studies decision making where rational opponents have conflicting interests. It analyzes situations involving two or more players by considering the choices available to each. The goal is for each player to select the best strategy given the other players' possible choices. Game theory provides a scientific approach to rational decision making in competitive scenarios.

Uploaded by

Suman Singh
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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GAME THEORY

Game theory is a body of knowledge which is concern with the study of decision making in situation where two or more rational opponents are involved under condition of completion and conflicting interest. Game theory are type of decision theory which is based on reasoning in which the choice of action is determined after considering the possible alternatives available to opponents playing same game. The aim is to choose the best course of action, because every player has got an alternative course of action. Game theory is an scientific approach to rational decision making.

ESSENTIAL FEATURES OF GAME THEORY.


There are finite number of competitor called player. A list of finite number of possible course of action is available to each player. Each player has the knowledge of alternatives available to his opponent. Each player makes a choice. The play is associated with an outcome known as gain. The possible gain or loss of each player depends upon not only the choice made by him but also the choice made by his opponent.

Two Person Zero Sum Game.


Two person zero sum game is the situation which involve two persons or players and gain made by one person is equal to the loss incurred by the other.

Types of strategy: 1) Pure strategy:


It is the predetermined course of action to be employed by the players. The player lnew it in advance. It is usually represented by a number with which the course is associated.

2) Mixed strategy:
In mixed strategy the player decide his course of action in accordance with some fixed probability distribution. Probability are associated with each course of action and the selectionis done as per these probability . In mixed strategy the opponent can not be sure of the course of action to be taken on any particular occasion.

MAXI MIN. Criteria:


The maximizing player list his minimum gain from each strategy and selects the strategy which gives the maximum out of these minimum gains.

MINI MAX. Criteria:


The minimizing player list his maximum loss from each strategy and select the strategy which gives him the minimum loss out of these maximum losses.

VALUE OF GAME:
The value of the game is the maximum guaranteed gain to the maximizing player if both player use their best strategy. It refers to the average pay off per play of the game over a period of time.

SADDLE POINT:
The saddle point in a pay off matrix is one which is the smallest value in its row and largest value in its column. An element of a matrix that is simultaneously minimum of the row in which it occurs and the maximum of the column in which it occurs is a saddle point of the matrix game.

TYPES OF PROBLEMS:
1) Two person zero sum game with saddle point. 2) Game with mixed strategy ( no saddle point).

DOMINANCE RULE:
1) If all the element of a row (say i th row) of a pay off matrix are less than or equal to the corresponding each element of the other row (say j th row) , then the player A will never choose the i th strategy and j th row can be deleted from the matrix. 2) If all the elements of a column (say i th column) are greater than or equal to the corresponding elements of any other column (say j th column) then the i th column can be deleted from the matrix. 2x2 solution : Y Y1 X1 X X2 a11 b21 Y2 a12 b22

LIMITATION OF GAME THEORY:


1) 2) 3) 4) It is difficult for players to find the value of the payoff matrix accurately. In real world situation there will not be any two person games. Two parties involved is not necessarily the gain of other at all times. The loss of one person is not necessarily the gain if other at all times.

TYPES OF PROBLEMS:
1) When saddle point exist. 2) When saddle point does not exist (dominance property) 3) Graphical method.

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