Game theory is the study of interactive decision making between multiple agents where the payoff for each agent depends on the choices of the other agents. The document discusses the history and key concepts of game theory including normal and extensive forms, symmetric and asymmetric games, cooperative and non-cooperative games, zero-sum and non-zero-sum games, and Nash equilibrium. Nash equilibrium refers to a set of strategies where no player can benefit by changing their strategy given the strategies of other players.

1. PRESENTED BY :
vardhan jain
B.COM (HONS.) 2nd YEAR

2. History Of Game Theory
 The first known discussion of game theory
occurred in a letter written by James
Waldegrave in 1713
 Von Neumann's work in game theory
culminated in this 1944 book
 Theory of Games and Economic Behavior

3. MEANING OF GAME THEORY
“Game theory is the study of
interactive decision-making in
the sense that those involved
are affected by their own
choices and by the decisions of
others.”

4. Game theory V/S Decision theory
Decision theory Game theory
 Decision theory is
the study of how an
agent can maximize
its expected utility in
situations where
there are no other
agents making
choices.
 Game theory is the study of
how agents can maximize
their expected utility in
situations where multiple
agents make choices, and
the payoff function of each
agent depends on what all
of the other agents do.

5. Game Theory use in life
● Parents trying to get children to
behave
● Mangers trying to get worker to
behave
● Businesses competing in a market
● Gamblers betting in a card game

6. THE PRINCIPLES OF GAME THEORY
 Each decision maker has two or more choices or
sequences of choices ("plays").
 All possible combinations of decisions or plays result in a
clear outcome: win or lose.
 The scenarios have a well-defined outcome and decision
makers receive a "payoff (the value of the outcome to the
participants). That is, participants will gain or lose
something depending on the outcome.
 The decision makers know the rules of the game as well as
the payoffs of the other decision makers.
 The decision makers are rational: when faced with two
alternatives, players will choose the option that provides
the greatest benefits.

7. Extensive-form
 Extensive-form games generally involve
several acts or stages, and each player
chooses a strategy at each stage.
 The game’s information structure, i.e., how
much information is revealed to which
players concerning the game’s outcomes and
their opponents’.
 Extensive-form games are generally
represented using a tree graph

8. Normal form
 Games in normal form (strategic form) model
scenarios in which two or more players must
make a one-time decision simultaneously.
 These games are sometimes referred to a
one-shot game, simultaneous move games.
 The normal form is a more condensed form of
the game, stripped of all features but the
choice of each player’s pure strategies, and it
is more convenient to analyze.

9. Sequential Games
 look ahead and reason back
 Back up to the second-to-last
decision

10. simultaneous games
 Turning to simultaneous games, it is
immediately apparent that they must
be handled differently,
 Because there is not necessarily any
last move.

11. Cooperative game
 A game is cooperative if the players are
able to form binding commitments
 Cooperative games focus on the game
at large

12. Non cooperative games
 Non cooperative games are able to
model situations to the finest
details,
 producing accurate results

13. Symmetric game
 A symmetric game is a game where the
payoffs for playing a particular strategy
depend only on the other strategies
employed, not on who is playing them.
 If the identities of the players can be
changed without changing the payoff to
the strategies, then a game is
symmetric

14. Asymmetric games
 Asymmetric games are games where there
are not identical strategy sets for both
players.
 For instance, the ultimatum game and
similarly the dictator game have different
strategies for each player. It is possible,
however, for a game to have identical
strategies for both players, yet be
asymmetric.

15. Zero-sum games
 Zero-sum games are a special case of
constant-sum games, in which
choices by players can neither
increase nor decrease the available
resources.
 In zero-sum games the total benefit
to all players in the game, for every
combination of strategies

16. Non-zero-sum games
 Non-zero-sum games, because the
outcome has net results greater or less
than zero.
 Informally, in non-zero-sum games, a
gain by one player does not necessarily
correspond with a loss by another.

17. Nash Equilibrium
 A Nash Equilibrium is a collection of
strategies, one for each player, that are
mutual best replies in the sense that each
agent’s strategy is optimal given the
strategies of the other agents
 A Nash Equilibrium demonstrates
that no player has an incentive to
deviate from his strategy given that
the other players don’t deviate