Game Theory Basics - 1
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Game Theory Basics:
Game theory is a type of decision theory in which one’s choice of action is determined after taking into account all possible alternatives available to an opponent playing the same game, rather than just by the possibilities of several outcome results. Game theory does not insist on how a game should be played but tells the procedure and principles by which action should be selected. Thus it is a decision theory useful in competitive situations.
Game is defined as an activity between two or more persons according to a set of rules at the end of which each person receives some benefit or suffers loss. The set of rules defines the game. Going through the set of rules once by the participants defines a play.
Properties of a Game
1. There are finite numbers of competitors called ‘players’
2. Each player has a finite number of possible courses of action called ‘strategies’
3. All the strategies and their effects are known to the players but player does not know which strategy is to be chosen.
4. A game is played when each player chooses one of his strategies. The strategies are assumed to be made simultaneously with an outcome such that no player knows his opponents strategy until he decides his own strategy.
5. The game is a combination of the strategies and in certain units which determines the gain or loss.
6. The figures shown as the outcomes of strategies in a matrix form are called ‘pay-off matrix’.
7. The player playing the game always tries to choose the best course of action which results in optimal pay off called ‘optimal strategy’.
8. The expected pay off when all the players of the game follow their optimal strategies is known as ‘value of the game’. The main objective of a problem of a game is to find the value of the game.
9. The game is said to be ‘fair’ game if the value of the game is zero otherwise it s known as ‘unfair’.
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