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    Rishabh Malhotra ERP - 0191MBA041 Jatin Soni ERP - 0191MBA028

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    Akshay Chaudhry
    Game theory is a framework for modeling strategic decision-making among competing players. It was pioneered by mathematicians John von Neumann and John Nash. Game theory analyzes games with different players, strategies, payoffs, and information sets to predict outcomes. Common applications include economics, politics, and business. Examples presented include the Boeing-Airbus game about developing a new plane and the Prisoner's Dilemma about confessing to crimes. Nash equilibrium is when no player can increase their payoff by changing strategies unilaterally. Games can be cooperative or non-cooperative depending on whether players negotiate. They can also be constant-sum, zero-sum, or non-zero-sum based on how payoffs

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    Rishabh Malhotra ERP - 0191MBA041 Jatin Soni ERP - 0191MBA028

    Uploaded by

    Akshay Chaudhry
    18 views19 pages
    Game theory is a framework for modeling strategic decision-making among competing players. It was pioneered by mathematicians John von Neumann and John Nash. Game theory analyzes games with different players, strategies, payoffs, and information sets to predict outcomes. Common applications include economics, politics, and business. Examples presented include the Boeing-Airbus game about developing a new plane and the Prisoner's Dilemma about confessing to crimes. Nash equilibrium is when no player can increase their payoff by changing strategies unilaterally. Games can be cooperative or non-cooperative depending on whether players negotiate. They can also be constant-sum, zero-sum, or non-zero-sum based on how payoffs

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    Game theory is a framework for modeling strategic decision-making among competing players. It was pioneered by mathematicians John von Neumann and John Nash. Game theory analyzes games with different players, strategies, payoffs, and information sets to predict outcomes. Common applications include economics, politics, and business. Examples presented include the Boeing-Airbus game about developing a new plane and the Prisoner's Dilemma about confessing to crimes. Nash equilibrium is when no player can increase their payoff by changing strategies unilaterally. Games can be cooperative or non-cooperative depending on whether players negotiate. They can also be constant-sum, zero-sum, or non-zero-sum based on how payoffs

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    18 views19 pages

    Rishabh Malhotra ERP - 0191MBA041 Jatin Soni ERP - 0191MBA028

    Uploaded by

    Akshay Chaudhry
    Game theory is a framework for modeling strategic decision-making among competing players. It was pioneered by mathematicians John von Neumann and John Nash. Game theory analyzes games with different players, strategies, payoffs, and information sets to predict outcomes. Common applications include economics, politics, and business. Examples presented include the Boeing-Airbus game about developing a new plane and the Prisoner's Dilemma about confessing to crimes. Nash equilibrium is when no player can increase their payoff by changing strategies unilaterally. Games can be cooperative or non-cooperative depending on whether players negotiate. They can also be constant-sum, zero-sum, or non-zero-sum based on how payoffs

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    of 19

    Presented Presented

    By By

    JATIN SONI RISHABH


    ERP – 0191MBA028 MALHOTRA
    ERP – 0191MBA041

    SUBMITTED TO –
    Mr. NAVNEET GERA
    WHAT IS GAME THEORY?

     In some respects, game theory is the science of strategy, or at least the optimal
    decision-making of independent and competing actors in a strategic setting.
     Game theory is a theoretical framework for conceiving social situations among
    competing players.
     The key pioneers of game theory were mathematicians John von Neumann
    and John Nash, as well as economist Oskar Morgenstern.
    THE BASICS OF GAME THEORY
     The focus of game theory is the game, which serves as a model of an interactive
    situation among rational players. 
     The key to game theory is that one player's payoff is contingent on the strategy
    implemented by the other player. 
     The game identifies the players' identities, preferences, and available strategies
    and how these strategies affect the outcome.
     Game theory has a wide range of applications, including psychology, war,
    politics, economics, and business.
     Despite its many advances, game theory is still a young and developing science.
    GAME THEORY JARGONS
     Game: Any set of circumstances that has a result dependent on the actions of two or
    more decision-makers (players)
     Players: A strategic decision-maker within the context of the game
     Strategy: A complete plan of action a player will take given the set of circumstances
    that might arise within the game
     Payoff: The payout a player receives from arriving at a particular outcome (The
    payout can be in any quantifiable form, from dollars to utility.)
     Information set: The information available at a given point in the game (The
    term information set is most usually applied when the game has a sequential
    component.)
     Equilibrium: The point in a game where both players have made their decisions and
    an outcome is reached
    Boeing-Airbus game
     Boeing and Airbus have to decide whether to invest in the development of a
    Super Jumbo for long distance travel;
     if they both develop successfully the new plane, their profits will drop by 50
    millions a year;
     if only one develop the Super Jumbo, it will make 80 millions a year in
    additional profits, whereas the profits of the other firm will drop by 30 millions
    a year;
     if no firm develops the plane, nothing changes.
    Matrix Representation of Boeing-Airbus game

    Airbus

    Do not
    Develop
    develop

    Develop -50,-50 80,-30


    Boeing
    Do not
    -30,80 0,0
    develop
    Prisoners’ Dilemma

     Two individuals have been arrested for possession of guns. The police
    suspects that they have committed 10 bank robberies;
     if nobody confesses the police, they will be jailed for 2 years.
     if only one confesses, he’ll go free and her partner will be jailed for 40
    years.
     if they both confess, they get 16 years
    Matrix Representation of Prisoners Dilemma

    Jatin

    Do not
    Confess
    Confess

    Confess 16,16 0,40


    Rishabh
    Do not
    40,0 2,2
    Confess
    We want to predict the outcome of the game

    Suppose that Rishabh decides to confess. What is the best decision for Jatin?

    Jatin

    Do not
    Confess
    Confess

    Confess 16,16 0,40


    Rishabh
    Do not
    40,0 2,2
    Confess
    We want to predict the outcome of the game

    Suppose that Rishabh decides to remain silent. What is the best decision for Jatin?

    Jatin

    Do not
    Confess
    Confess

    Confess 16,16 0,40


    Rishabh
    Do not
    40,0 2,2
    Confess
    We want to predict the outcome of the game
    Suppose that Jatin decides to confess. What is the best decision for Rishabh?

    Jatin

    Do not
    Confess
    Confess

    Confess 16,16 0,40


    Rishabh
    Do not
    40,0 2,2
    Confess
    We want to predict the outcome of the game
    Suppose that Jatin decides to remain silent. What is the best decision for Rishabh?

    Jatin

    Do not
    Confess
    Confess

    Confess 16,16 0,40


    Rishabh
    Do not
    40,0 2,2
    Confess
    Outcome of the Game

    Jatin

    Do not
    Confess
    Confess

    Confess 16,16 0,40


    Rishabh
    Do not
    40,0 2,2
    Confess
    NASH EQUILIBRIUM

     Nash Equilibrium is an outcome reached that, once achieved, means no player can
    increase payoff by changing decisions unilaterally. It can also be thought of as "no
    regrets," in the sense that once a decision is made, the player will have no regrets
    concerning decisions considering the consequences.
     The decisions of the players are a Nash Equilibrium if no individual prefers a
    different choice.
     In other words, each player is choosing the best strategy, given the strategies
    chosen by the other players.
    Cooperative & Non-Cooperative
     Cooperative games are the one in which players are convinced to adopt a
    particular strategy through negotiations and agreements between players. Let us
    take the example cited in prisoner’s dilemma to understand the concept of
    cooperative games. In case, John and Mac had been able to contact each other,
    then they must have decided to remain silent. Therefore, their negotiation would
    have helped in solving out the problem.
     Non-cooperative games refer to the games in which the players decide on their
    own strategy to maximize their profit. The best example of a non-cooperative
    game is prisoner’s dilemma. Non-cooperative games provide accurate results.
    This is because in non-cooperative games, a very deep analysis of a problem takes
    place.
    Constant Sum, Zero Sum & Non Zero
    Sum
     Constant sum game is the one in which the sum of outcome of all the players
    remains constant even if the outcomes are different. Zero sum game is a type of
    constant sum game in which the sum of outcomes of all players is zero. In zero
    sum game, the strategies of different players cannot affect the available resources.
     Moreover, in zero sum game, the gain of one player is always equal to the loss of
    the other player. On the other hand, non-zero sum game are the games in which
    sum of the outcomes of all the players is not zero.
     A non-zero sum game can be transformed to zero sum game by adding one
    dummy player. The losses of dummy player are overridden by the net earnings of
    players.
     Examples of zero sum games are chess and gambling. In these games, the gain of
    one player results in the loss of the other player. However, cooperative games are
    the example of non-zero games. This is because in cooperative games, either
    every player wins or loses.
    THANK YOU !

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