GAME THEORY

OVERVIEW
MANIPULATION
APPLICATIONS
 What is Game Theory?

•Game theory is a branch of applied

mathematics that is often used in the context of
economics , Computer Science , etc.
• It studies strategic interactions between
agents.
 History
• Interdisciplinary approach to the study of
human behavior
• Founded in the 1920s by John von Neumann
• 1994 Nobel prize in Economics awarded to
three researchers(one was John Forbes Nash).
• “Games” are a metaphor for wide range of
human interactions
 Applications of Game Theory

• Mathematics  Psychology
 Law
• Computer Science
 Military Strategy
• Biology
 Management
• Economics  Sports
• Political Science  Game Playing
• International  Philosophy
Relations

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 Bidding up to 50
• Two-person game
• Start with a number from 1-4
• You can add 1-4 to your opponent’s number and bid that
• The first person to bid 50 (or more) wins
• Example
1, 5, 8, 12, 15, 19, 22, 25, 27, 30, 33, 34, 38, 40, 41, 43, 46, 50
• Game theory tells us that person 2 always has a winning
strategy
– Bid 5, 10, 15, …, 50
• Easy to train a computer to win
 Types of games
• Cooperative or non-cooperative
• Symmetric and asymmetric
• Zero sum and non-zero sum
• Simultaneous and sequential
• Perfect information and imperfect information
• Infinitely long games
• Discrete and continuous games
• Meta games
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 Key Elements of a Game

• Players: Who is interacting?

• Strategies: What are their options?
• Payoffs: What are their incentives?
• Information: What do they know?
• Rationality: How do they think?

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 PAY-OFF
• The outcomes of a game due to adopting the
different courses of action by the competing
players in the form of gains or losses for each
of the player is known as pay-off.
• PAY-OFF MATRIX :
To show the pay-off’s of a
game through a rectangular matrix is called
pay-off matrix.
 Representation of games
The games studied by game theory are well-
defined mathematical objects. A game
consists of a set of players, a set of moves (or
strategies) available to those players, and a
specification of payoffs for each combination
.of strategies

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 Extensive form
Games here are often presented as trees. Here
each vertex (or node) represents a point of
choice for a player. The player is specified by a
number listed by the vertex. The lines out of
the vertex represent a possible action for that
player. The payoffs are specified at the
.bottom of the tree

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Extensive form

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 Normal form
• The normal (or strategic form) game is usually represented by
a matrix which shows the players, strategies, and payoffs.
More generally it can be represented by any function that
associates a payoff for each player with every possible
combination of actions.

Player 2 Player 2
chooses Left chooses Right
Player 1
chooses Up
4, 3 –1, –1
Player 1
chooses Down
0, 0 3, 4

Normal form or payoff matrix of a 2-player, 2-strategy game

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 Normal form
• When a game is presented in normal form, it
is presumed that each player acts
simultaneously or, at least, without knowing
the actions of the other. If players have some
information about the choices of other
players, the game is usually presented in
extensive form.

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 DOMINANCE

What is a Dominant Strategy?A

particular strategy that is found to be
preferable over other strategies
available to a player is called the
“dominant strategy” for that player.
PRINCIPLES OF DOMINANCE

RULE 1
If all the elements in a row ( say ith row )
of a pay off matrix are less than or equal
to the corresponding elements of the
other row ( say jth row ) then the player A
will never choose the ith strategy then we
say ith strategy is dominated by jth strategy
and will delete the ith row.
PRINCIPLES OF DOMINANCE

RULE 2
If all the elements in a column ( say rth column ) of a
payoff matrix are greater than or equal to the
corresponding elements of the other column ( say sth
column ) then the player B will never choose the rth
strategy or in the other words the rth strategy is
dominated by the sth strategy and we delete rth
column .
A Beautiful Mind.
 Game Theory
• Nash equilibrium
– DEFINITION: If there is a set of strategies with the property
that no player can benefit by changing her strategy while
the other players keep their strategies unchanged, then
that set of strategies and the corresponding payoffs
constitute the Nash Equilibrium.

– When both players have dominant strategy, the

solution to the game theory is Nash equilibrium
 Game Theory
The prisoners' dilemma
B's strategies
Not confess Confess
A's
strategies
Each gets A gets 5 years
Not 1 year B gets 0 years
+* confess (1,1) (5, 0)

A gets 0 years Each gets

Confess B gets 5 years 3 years
(0, 5) (3,3)
 Battle of Couples
• A couple deciding how to spend the evening
• Wife would like to go for a movie
• Husband would like to go for a cricket match
• Both however want to spend the time together
• Scope for strategic interaction
 Games
• Normal Form representation – Payoff Matrix

Husband

Movie Cricket
Movie 2,1 0,0
Wife
Cricket 0,0 1,2
 Network example
C(x) = 1

C(x) = x
• Simple network from s to t with two links
– Delay (or cost) of transmission is C(x)
• Total amount of data to be transmitted is 1
• Optimal: ½ is sent through lower link
– Total cost = 3/4
• Game theory solution (selfish routing)
– Each bit will be transmitted using the lower link
– Not optimal: total cost = 1
• Price of anarchy is, therefore, 4/3

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 Do high-speed links always help?
C(x) = x C(x) = 1 C(x) = x C(x) = 1
C(x) = 0
C(x) = 1 C(x) = x C(x) = 1 C(x) = x

• ½ of the data will take route s-u-t, and ½ s-v-t

• Total delay is 3/2
• Add another zero-delay link from u to v
• All data will now switch to s-u-v-t route
• Total delay now becomes 2
• Adding the link actually makes situation worse
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 Extended Prisoners’ Dilemma (1)
A bimatrix game with two bank robbers
- A bank robbery (unsure, video tape) and a minor crime (sure, DNA)
- Players are interrogated independently

Robber 2

silent testify confess

silent 3 3 0 4 0 0
Robber 1 testify 4 0 1 1 0 0

confess 0 0 0 0 0 0
 Extended Prisoners’ Dilemma (2)
A bimatrix game with two bank robbers

Robber 2

silent testify confess

silent 3 3 0 4 0 0 Payoff = number of saved

years in prison
Robber 1 testify 4 0 1 1 0 0

confess 0 0 0 0 0 0

Silent = Deny bank robbery

Testify = Betray other player (provide evidence of other player‘s bankrobbery)

Confess = Confess bank robbery (prove that they acted together)

 Extended Prisoners’ Dilemma (3)
Concept of non-dominated strategies

Robber 2

silent testify confess

silent 3 3 0 4 0 0 dominated by „testify“

Robber 1 testify 4 0 1 1 0 0 non-dominated strategy

confess 0 0 0 0 0 0 dominated by „silent“ and „testify“

non-dominated strategy profile

Non-dominated strategy may not be unique!

In this talk, we use weakest assumption that players choose any

non-dominated strategy. (here: both will testify)

Stefan Schmid @ ISAAC 2007 28

Mechanism Design by Al Capone (1)
Hence: both players testify = go 3 years to prison each.

Robber 2

silent testify confess

silent 3 3 0 4 0 0
Robber 1 testify 4 0 1 1 0 0

confess 0 0 0 0 0 0

Not good for gangsters‘ boss Al Capone!

- Reason: Employees in prison!
- Goal: Influence their decisions
- Means: Promising certain payments for certain outcomes!
 Mechanism Design by Al Capone (2)
s t c

s 3 3 0 4 0 0 New non-dominated
strategy profile!
t 4 0 1 1 0 0 Original game G... Al Capone has to pay money
worth 2 years in prison, but saves
c 0 0 0 0 0 0 4 years for his employees!
Net gain: 2 years!
s t c

s 1 1 2 0

+ ... plus Al Capone‘s

monetary promises V ... t 0 2

s t c

s 4 4 2 4 0 0

= ... yields new game G(V)! t

c
4

0
2

0
1

0
1

0
0

0
0

0
 Al Capone can save his employees 4 years in prison
at low costs!

Can the police do a similar trick to increase the total

number of years the employees spend in prison?

Stefan Schmid @ ISAAC 2007 31

 Mechanism Design by the Police
s t c

s 3 3 0 4 0 0 New non-dominated
strategy profile!
t 4 0 1 1 0 0 Original game G... Both robbers will confess
and go to jail for four years
c 0 0 0 0 0 0 each! Police does not have to
pay anything at all!
s t c Net gain: 2

s 0 5

+ ... plus the police‘

monetary promises V ... t 0 2

c 5 0 2 0

s t c

s 3 3 0 4 0 5

= ... yields new game G(V)! t

c
4

5
0

0
1

2
1

0
0

0
2

0
Definition:

Strategy profile implemented by Al Capone has

leverage (potential) of two: at the cost of money
worth 2 years in prison, the players in the game
are better off by 4 years in prison.

Strategy profile implemented by the police has a

malicious leverage of two: at no costs, the players
are worse off by 2 years.

Stefan Schmid @ ISAAC 2007 33

 Other computer science applications
• Internet
• Routing
• Job scheduling
• Competition in client-server systems
• Peer-to-peer systems
• Cryptology
• Network security
• Sensor networks
• Game programming