Chapter 1 Flashcards

Course introduction, pre-requisites, single-person decision problem

1
Q

What is the primary focus of game theory?

A

Game theory focuses on multi-person, multi-objective problems using mathematical models.

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2
Q

Why are simplified models used in game theory?

A

Simplified models are used because many real-life scenarios are too complex and require easier mathematical approaches.

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3
Q

What distinguishes single-person problems from multi-agent problems in game theory?

A

Single-person problems depend only on the individual’s ability, whereas multi-agent problems involve dependencies on the choices of others.

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4
Q

What are the common assumptions in game theory?

A

The rules of the game are known in advance, and all players are rational.

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5
Q

Name two fields other than economics where game theory is applied.

A

Game theory is applied in engineering (e.g., distributed systems) and biology (e.g., predicting behaviors).

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6
Q

What is a discount factor, and why is it important?

A

A discount factor 𝛿 < 1 accounts for the loss of value over time due to greed, uncertainty, or other factors.

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7
Q

What makes preferences rational in game theory?

A

Preferences are rational if they are complete (every pair of options is comparable) and transitive (preferences maintain logical consistency).

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8
Q

What are utility functions in game theory?

A

Utility functions assign numerical values to outcomes to represent the preferences of players.

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9
Q

How does game theory handle irrational or non-selfish behavior?

A

Game theory adjusts utility functions to account for generosity, illogical preferences, or mistakes.

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10
Q

What role do decision trees play in game theory?

A

Decision trees visually represent the decision-making process, including alternatives, preferences, and utilities.

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