Essay Example on THE CONCEPT OF GAME THEORY

These concepts offer a proper language to formulate structuralise analyse and understand strategic scenarios and decisions Some important terms 1 Backward induction it is a technique to solve a game of perfect information It first considers the last moves in the game and then helps in determining the best moves that are last in the game Then taking these future predictions into mind decisions are made accordingly to achieve the best or desired output 2 Common knowledge it is a fact which is known by all players or agents The structure of the game is often considered to be a part of the common knowledge 3 Dominating strategy such a strategy always gives a player a better output or payoff regardless of what other agents opt for 4 Extensive game it explains with the help of a tre how the game is played It tells the structure of the game like how the players will make a move and the information that a player has to have in the game while making a relevant decision 5 Game it is a formal description of a strategic situation 6 Game theory it is a formal study of decision making where several players must make decisions that will potentially affect the interests of other players 

7 Mixed strategy in brief it can be explained using three points which are active randomisation with given probabilities and determination of player s decision In a special case a mixed strategy can be deterministic choice the given pure strategies 8 Nash equilibrium also called as a strategic equilibrium It is a list of strategies one for every player such that none of the players can unilaterally change his strategy to get a better payoff 9 Payoff Payoff is a number also called as utility which shows the desirability of an outcome to a player for any reason When the given set of outcomes is random payoffs are usually weighted with their probabilities 10 Perfect information a game generally has perfect information when a given point in time only one player makes a move and knows about all the actions that have been made until then 11 Player he or she is an agent who makes decisions in a game 12 Rationality a rational player is one who seeks to play the game in such a manner that maximizes his return Rationality of players is considered under common knowledge 13 Strategic form its also called as a game in normal form It is a compact representation of the game where all players simultaneously choose their strategies The resulting payoffs are presented in tabular form in which there is a cell for different strategy combinations 14 Strategy in a game in strategic form a strategy is said to be one of the given possible actions available with the player 15 Zero sum game zero sum game is said to occur when for any given outcome the payoff to all players is zero For a decision maker the strength of game theory depends on the structure of the game An efficient structure provides an accurate way of analysing problems for best choice The process of formally modeling a situation as a game involves the player to enumerate explicitly the players and the strategic options available and to consider their respective preferences and reactions A fair knowledge of game theory helps in providing a better clearer and broader view of the situation 

This is a perspective property of game theory and its goal of improved strategic decision making The main objective of the game theory is the game it's a formal model of a typical situation It generally involves many players a game with a single player is called a decision making problem Games can be formally described at various levels of diverse detail A coalitional or cooperative game is a high level description specifying only what payoffs each potential group or coalition can obtain by the cooperation of its members What is not made explicit is the process by which the coalition forms As an example the players may be several parties in parliament Each party has a different strength based upon the number of seats occupied by party members The game describes which coalitions of parties can form a majority but does not delineate for example the negotiation process through which an agreement to vote en bloc is achieved Cooperative game theory investigates such coalitional games with respect to the relative amounts of power held by various players or how a successful coalition should divide its proceeds This is most naturally applied to situations arising in political science or international relations where concepts like power are most important For example Nash proposed a solution for the division of gains from agreement in a bargaining problem which depends solely on the relative strengths of the two parties bargaining position