Chapter 1 Flashcards
Course introduction, pre-requisites, single-person decision problem
What is the primary focus of game theory?
Game theory focuses on multi-person, multi-objective problems using mathematical models.
Why are simplified models used in game theory?
Simplified models are used because many real-life scenarios are too complex and require easier mathematical approaches.
What distinguishes single-person problems from multi-agent problems in game theory?
Single-person problems depend only on the individual’s ability, whereas multi-agent problems involve dependencies on the choices of others.
What are the common assumptions in game theory?
The rules of the game are known in advance, and all players are rational.
Name two fields other than economics where game theory is applied.
Game theory is applied in engineering (e.g., distributed systems) and biology (e.g., predicting behaviors).
What is a discount factor, and why is it important?
A discount factor 𝛿 < 1 accounts for the loss of value over time due to greed, uncertainty, or other factors.
What makes preferences rational in game theory?
Preferences are rational if they are complete (every pair of options is comparable) and transitive (preferences maintain logical consistency).
What are utility functions in game theory?
Utility functions assign numerical values to outcomes to represent the preferences of players.
How does game theory handle irrational or non-selfish behavior?
Game theory adjusts utility functions to account for generosity, illogical preferences, or mistakes.
What role do decision trees play in game theory?
Decision trees visually represent the decision-making process, including alternatives, preferences, and utilities.
