Slide1: Game Theory *1
Slide2: The Game Theory is the study of how people behave in strategic situations. It is attempts to mathematically capture behaviours in strategic situations, in which an individual’s success in making choices depends on the choices of others. Strategic decisions are those in which each person, in deciding what to take, must consider how others might respond to that action. I am going to provide an example in which players make domain strategy regardless of others’ decisions, and this will make you fully understand.
Slide3: Prisoners' Dilemma. The Prisoners’ Dilemma provides insight into the difficulty in maintaining cooperation.Often people or firm fail to cooperate with one another even when cooperation would make them better off.The prisoners’ dilemma is a particular “game” between two captured prisoners that illustrate why cooperation is difficult to maintain even when it is mutually beneficial.*2
Slide4: Suppose there are 2 criminals- Mike and Alex.The police have caught them on a weapons’ charge which the punishment is 1 year. The police suspect they robbed a bank, but lack of evidence, therefore, they need one or both of them to confess.They separate the criminals and offer each of them the same deal. *3
Slide5: If you confess to the bank robbery. I’ll let you go free and your partner will get 20 years in jail.If you both confess, we won’t have to go to trial so you will each get 8 years in jail.If neither of you says anything, we’ve got you on the weapons’ charge, so you will each get 1year in jail. *4
Slide6: Pay-off Matrix
Slide7: If Alex choose to confess, Mike will confess too, for -8 > -20.If Ales choose to keep silent, Mike will confess anyways, for 0 > -1.If Mike choose to confess, Alex will confess too, for -8 > -20.If Mike choose to keep silent, Alex will confess anyways, for 0 > -1.For both criminals, their dominant strategy* is the same: They should confess, rather than risk that the other will confess if they keep silent.* The dominant strategy is the best strategy for a player to follow regardless of the strategies chosen by the other players.
Slide8: People will choose Dominant Strategy 100%,regardless others’ Strategies.
Slide10: References and Works Cited:Info:●http://en.wikipedia.org/wiki/Game_theoryImages:*1:http://pic.nipic.com/2008-01-15/200811513133263_2.jpg*2:http://www.cartoonstock.com/lowres/dre0595l.jpg*3:http://www.cartoonstock.com/lowres/dre0174l.jpg*4:http://www.cartoonstock.com/newscartoons/cartoonists/ksm/lowres/ksmn493l.jpg*5:http://fs01.bokee.net/userfilespace/2006/11/18/zdylawyer230710.jpg*6:http://www.cartoonstock.com/lowres/sea0757l.jpg*7:http://www.cartoonstock.com/lowres/sea0684l.jpg