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    1 - Chatper 1 - Introduction To The Course Game Theory

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    Mussab Almoqbali
    This document provides an introduction and overview of an economics course on game theory. It includes the following key points: - The course is ECON 4283 Game Theory taught in the spring 2022 semester. The textbook and course materials are listed. - The assessment plan includes exams, quizzes, a project, and participation. Grading is outlined. - The course outline lists topics such as normal form games, extensive form games, Bayesian games, and analysis of static and dynamic settings. - Examples of applications of game theory are given such as business competition, voting, sports, and biology.

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    1 - Chatper 1 - Introduction To The Course Game Theory

    Uploaded by

    Mussab Almoqbali
    44 views20 pages
    This document provides an introduction and overview of an economics course on game theory. It includes the following key points: - The course is ECON 4283 Game Theory taught in the spring 2022 semester. The textbook and course materials are listed. - The assessment plan includes exams, quizzes, a project, and participation. Grading is outlined. - The course outline lists topics such as normal form games, extensive form games, Bayesian games, and analysis of static and dynamic settings. - Examples of applications of game theory are given such as business competition, voting, sports, and biology.

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    1 - Chatper 1 - Introduction to the course Game Theory copy

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    This document provides an introduction and overview of an economics course on game theory. It includes the following key points: - The course is ECON 4283 Game Theory taught in the spring 2022 semester. The textbook and course materials are listed. - The assessment plan includes exams, quizzes, a project, and participation. Grading is outlined. - The course outline lists topics such as normal form games, extensive form games, Bayesian games, and analysis of static and dynamic settings. - Examples of applications of game theory are given such as business competition, voting, sports, and biology.

    Copyright:

    © All Rights Reserved
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    Download as pptx, pdf, or txt
    44 views20 pages

    1 - Chatper 1 - Introduction To The Course Game Theory

    Uploaded by

    Mussab Almoqbali
    This document provides an introduction and overview of an economics course on game theory. It includes the following key points: - The course is ECON 4283 Game Theory taught in the spring 2022 semester. The textbook and course materials are listed. - The assessment plan includes exams, quizzes, a project, and participation. Grading is outlined. - The course outline lists topics such as normal form games, extensive form games, Bayesian games, and analysis of static and dynamic settings. - Examples of applications of game theory are given such as business competition, voting, sports, and biology.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 20

    ECON 4283 Game Theory

    Lecture 1
    Introduction to Game Theory
    Course

    Spring 2022

    Dr. Nisar Ahmad


    Textbook

    › An Introduction to Game Theory (2009) by Martin Osborne


    › The first 3 chapters are available for download on the textbook
    webpage (see course website for details)
    › Prerequisites: you should be familiar with Principles of
    Microeconomics (ECON1211).
    › Announcements, slides, & homework will be posted on Moodle
    Course key: GTSPRING2022
    Dr. Nisar Ahmad
    Game Theory 101: The Complete
    Textbook
    by William Spaniel

    Recommended to download kindle


    edition 5USD = 2 OMR

    YouTube videos are available based on


    book

    Dr. Nisar Ahmad


     Assessment Plan
    Midterm exam 30%,
    Final exam 30%
    Quizzes 15%
    Project 20%
    Participation : Attendance 5%
    0-5% 5 marks, 5 - 10% 4 marks, 10 - 15% 3 marks, Less then 15% 2 marks
    There will be two quizzes in this course.
    Quiz 1: Week 7
    Midterm: Week 8
    Quiz 2: Week 12
    Project Deadline: Week 14 (Project topic deadline Week 10)
    Project Presentations Week 15
    Dr. Nisar Ahmad
    Course information

    Office Hours: Monday and Wednesday 10:00 am - 11:00 am ›


    Email: [email protected]
    › Office: 1017B
    ›,
    or by appointment

    Dr. Nisar Ahmad


    Game Theory used in TV show Golden Balls?
    100150 GBP = 50000 OMR

    Dr. Nisar Ahmad


    Dr. Nisar Ahmad
    A Beautiful Mind
    Course Outline

    • A. Analysis of Static Setting


    • Normal Form Games: Chapters 2, 3, 4
    • Dominant and dominated strategies
    •  Iterative elimination of dominated strategies
    •  Pure Strategy Nash Equilibrium, Theory and Application
    •  Mixed Strategy Nash Equilibrium, Theory and Application
    •  Bayesian Games I: Chapter 9
    •  Describing simultaneous move games with imperfect information using ex-
    ante normal form games, Bayes-Nash Equilibrium
    • B. Analysis of Dynamic Setting
    • Extensive Form Games: Chapter 5
    •  Describing games with sequential moves
    • Backward induction
    • Subgame perfect equilibrium and applications
    •  Bayesian Games II: Chapter 10

    Dr. Nisar Ahmad


    What is Game Theory, and Why do we Need It?

    • Game Theory is the mathematical study of strategic situations, i.e. where there is more than
    one decision-maker, and each decision-maker can affect the outcome.
    • Previously in microeconomics, you studied single-person problems.
    • For example:
    • How much of each good to consume, in order to maximize my utility?
    • How much output should a firm produce, in order to maximize profits?
    • However, in multi-agent situations, my choice may change your problem.
    • We need a method that takes everyone’s choices into account.

    • Rational behavior: choose the level that


    maximizes utility (or profits, or payoffs).

    Dr. Nisar Ahmad


    Examples of Strategic Situations

    • Business
    • Competition between firms: price, quality, location...
    • Market segmentation by firm: offer different levels of quality
    • Auctions
    • Political Science
    • Voting Strategically: always vote for your candidate, or vote to
    ensure your least preferred candidate loses?
    • Sports
    • Tennis Serving
    • Soccer Penalty Kicks
    • Biology
    • › Why do animals confront each other, but rarely
    fight? (Hawk-Dove game)
    • › Why does the peacock have a huge, costly tail?

    (Signaling, Handicap Principle)

    Dr. Nisar Ahmad


    Mathematical Definition of a Strategic (or Normal-Form) Game

    • Terminology:
    1. The decision-makers are called players.
    2. Each player has a set of possible actions. A list of actions (e.g. the
    list of what players choose) is called an action profile.
    3. Each player has preferences over the outcome of the game. The
    outcome is determined by the actions that all players have chosen.
    Some outcomes are more desirable than others.

    Dr. Nisar Ahmad


    • A Strategic game or Normal-Form is a model of
    interaction in which each player chooses an
    action without knowing what other players
    choose
    • We can think of this as players choosing their
    actions simultaneously.
    Game Theory

    Static Games Dynamic Games

    Static Games with Static Games with Dynamic Games Dynamic Games
    complete incomplete with complete with incomplete
    information information information Information

    Dr. Nisar Ahmad 14


    Static or Strategic (or Normal-Form) Game

     We need to specify:
     who the players are
     what they can do
     their preferences over the possible outcomes
     Definition: A strategic game consists of:
    1. a set of players
    2. for each player, a set of actions
    3. for each player, preferences (i.e. a ranking) over all possible action
    profiles
     We will usually use payoff functions that represent preferences, instead of using
    preferences directly.

    Dr. Nisar Ahmad


    A 2-Player Static Game: The Prisoner’s Dilemma

    o Let’s consider a specific example. Imagine this situation:


    o Players: There are two suspects in a crime
    o Actions:
    o Each suspect can be convicted of a minor offense, but can only be
    convicted of a major offense if the other suspect finks (i.e. gives
    information to the police).
    o Each suspect can choose to be Quiet or Confess (inform).
    o Payoffs
    o If both stay quiet, each gets 1 month in prison.
    o If only one suspect Confess, he goes free while the other suspect gets 12
    months prison.
    o If both suspects Confess, they both get 8 months.

    Dr. Nisar Ahmad


    Modeling the Prisoner’s
     Players: Dilemma
    The two suspects.
     Actions: Each player’s set of actions is Q, C.
     Preferences: We’ll write down the action profile as: (Suspect 1’s
    choice, Suspect 2’s choice).
     Suspect 1’s preferences, from best to worst:
     (F, Q) > (Q, Q) > (F, F ) > (Q, F )
     Suspect 2’s preferences, from best to worst:
     (Q, F ) > (Q, Q) > (F, F ) > (F, Q)

    Player 2
    Q C
    Q -1, -1 -12,0
    Player 1
    C 0,-12 -8,-8

    Dr. Nisar Ahmad


    Instead of using preferences directly, we will use a payoff function that
    assignsBi-Matrix Form
    a utility to each of Prisoner’s Dilemma
    outcome: 0 = Free = satisfaction = 4
    › Suspect 1:

    u1 (C, Q) = 4, u1 (Q, Q) = 3, u1 (C, C ) = 2, u1 (Q, C ) =1 -1 = one month jail = satisfaction = 3


    › Suspect 2:

    u2 (C, Q) = 1, u2 (Q, Q) = 3, u2 (C, C ) = 2, u2 (Q, C ) = 4 - 8 = 8 months jail = satisfaction = 2


    Player 2
    Q F -12 = 12 months jail = satisfaction = 1
    Q 2,2 0,3
    Player 1 3,0 1,1
    F
    › We can collect the payoff values into a payoff matrix:
    › The two rows are the two possible actions of Player 1.
    › The two columns are the two possible actions of Player 2.
    › In each cell, the first number is the payoff of Player 1; the
    second is the payoff of Player 2.
    Dr. Nisar Ahmad
    Examples of Static games

    Joint Student Project


    › Players: Two students
    › Actions: Each of you can choose to Work hard or Lazy.
    › If the other person Works hard, each of you prefers to be lazy.
    › Project would be better if both work hard, but not worth the
    extra effort.

    Player 2
    Work hard Lazy
    Work hard
    Player 1 Lazy

    Dr. Nisar Ahmad


    Duopoly

    Duopoly: Price Competition


    › Players: Two firms, producing the same good.
    › Actions: Each firm can charge a High price or a Low price.
    › Preferences:
    if both firms charge a high price, both get profit of 3000.
    › If only one firm charges a high price, it loses customers, makes
    profit of 1000. Other firm charges low price, gets profit of 4 0 0 0
    › If both firms charge low price, both get profit of 2000.

    Dr. Nisar Ahmad

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