Game Theory Analysis

Topics: Game theory, Nash equilibrium, Economics Pages: 4 (1342 words) Published: April 3, 2013
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“When I am getting ready to reason with a man I spend one-third of my time thinking about myself and what I am going to say, and two-thirds thinking about him and what he is going to say.” Abraham LincolnA game occurs when there are two or more interacting decision-takers (players) and each decision or combination of decisions involves a particular outcome (pay-off.) The fate (or the payoff) of a player in a game depends not only on the actions of that player but also on the other players!The Monty Hall problem! Suppose you’re on a game show, and you’re given the choice of three doors. Behind one door is a car, behind the others, goats. You pick a door, say number 1, and the host, who knows what’s behind the doors, opens another door, say number 3, which has a goat. He says to you, “Do you want to pick door number 2?” Is it to your advantage to switch your choice of doors? Possible answer to the Monty Hall problemGame theory is mainly concerned with predicting the outcome of games of strategy in which the participants (for example two or more businesses competing in a market) have incomplete information about the others' intentions. The Prisoners’ DilemmaThe classic example of game theory is the Prisoners’ Dilemma, a situation where two prisoners are being questioned over their guilt or innocence of a crime. They have a simple choice, either to confess to the crime...
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