Important Stuff Flashcards
Qualifications for strategic games
Mutual awareness of cross effect. Unless there are two or more players, each of whom responds to what others do, or what they think the other might do, it is not a game.
Two types of strategic games
Sequential moves and simultaneous moves
How impersonal markets become strategic games
Mutual commitment or private information. When each participant is significant in the interaction, either because each is a large player to begin with of because commitments or private information narrow the scope so that each player is important in the relationship.
Mutual commitment
When choosing one builder to renovate it becomes a strategic game for example. When the relationship becomes bilateral.
Private information
Insurance company determining health of individual applicants.
Constant sum game
Often substituted for a zero sum game. The idea is that the players’ interests are in complete conflict.
One shot games
Actions are more likely to be unscrupulous or ruthless
Classifying games
1) are the moves sequential or simultaneous?
2) are the players’ interests in total conflict or is there some commonality?
3) is the game played once or repeatedly, and with the same or changing opponents?
4) do the players have full or equal information?
5) are the rules fixed or manipulable?
6) are agreements to cooperate enforceable?
Limitations on information
External uncertainty and strategic uncertainty
External uncertainty
A player may be uncertain about external circumstances
Strategic uncertainty
A player may be uncertain about exactly what moves the opponent has made in the past of is making at the time the player makes her move
Perfect information
A game that doesn’t have external or strategic uncertainty
Incomplete or asymmetric information
When one player knows more than another. In such situations players attempt to infer, conceal, or sometimes convey their private information.
Good principle 1
You want to release your information selectively. You want to reveal the good information (the kind that will draw responses from the other players that work to your advantage) and conceal the bad (the kind that may work to your disadvantage)
Signals- signaling
Opponents will not recognize your unsupported declarations about progress or capabilities. They can be convinced only by objective evidence or by actions that are credible proof of your information. Such actions on the part of the more informed player are called signals.
Screening, screening devices
The less informed party can create situations in which the more informed player will have to take some action that credibly reveals his information.
General principle 2
When different players have different information, the manipulation of information itself becomes a game, perhaps more important than the game itself
Pre-game
The game that sets the agenda. Where the rules are made- strategic skills can be deployed at this point. Some players, such as Rockefeller, only participated in games where they could participate in making the rules.
Cooperative agreement
Games in which joint-action agreements are enforceable
Noncooperation agreements
Agreements in which enforcement is not possible and individual participants must be allowed to act in their own interests.
Strategies
The complete plan of action. The choices available to the players. Each player must make a complete plan of action whether the game is sequential or simultaneous.
Payoff
The number associated with each possible outcome. 1) the payoffs for one player capture everything in the outcomes of the game that the player cares about. The player need not be selfish, but the player need not be selfish, but concern for others is factored in the payoff. 2) we will suppose that, if the player faces a random prospect of outcomes, then the number associated with this prospect is the average of the payoffs associated with each component outcome, each weighed by its probability
Expected payoff
Probability that an outcome happen. Multiplying and adding.
Rational behavior
Assumes that players are perfect calculators and flawless followers of their best strategies. Has two essential ingredients: complete knowledge of ones own interests and flawless calculation if what actions will best serve those interests.
Rules of the game
1) the list of players, 2) the strategies available to each player, 3) the payoffs if each player for all possible combinations of strategies pursued by all the players, and 4) the assumption that each player is a rational maximizer
Equilibrium
Each player is using the strategy that is the best response to the strategies if the other players.
Evolutionary approach
A dynamic process in which strategies that proved to be better in previous plays of the game are more likely to be chosen in later plays. Some players come to the game with a particular strategy hard wired or programmed in. In many games the evolutionary stable limit is the same as the equilibrium that would result if the players were consciously rational calculators. Therefore the evolutionary approach gives us a Blackfoot justification for equilibrium analysis.
The uses of game theory
1) explanation- answer what did it happen?
2) prediction- use it to see what actions they will take and what outcomes will result.
3) advice/prescription- figure out which strategies are likely to yield good results and which are bad.
Rollback/backward induction
The method of looking ahead and reasoning back to determine behavior in sequential-move games. Requires starting to think about what will happen at all terminal nodes and literally “rolling back” through the tree to the initial node.
Rollback equilibrium
The outcome that arises from when all players choose their optimal strategies found by doing rollback analysis.
Optimal strategy
Complete plan of arguing for each player. Must specify the players best choices at each node where the rules of the game specify that she moves, even though many of these nodes will never be reached in the path of play.
Second-mover advantage
Comes from the flexibility to adapt oneself to the others’ choices. Whether commitment or flexibility is more important in a specific game depends on its particular configuration of strategies and payoffs.
Intermediate valuation function
A rule that gives you an indirect way of assigning plausible payoffs to nonterminal nodes, because you are not able to explicitly roll back from a full look-ahead. The typical method assigns values to each piece and to positional and combinational advantages that can arise during play. The sum if all the numerical values attached to pieces and their combinations in a position is the intermediate value of that position.
