Munich Personal RePEc Archive

Elementary game theory

Soni, Himanshu and Sharma, Damini (2015): Elementary game theory. Published in: Journal of Economics No. 61699 : pp. 1-34.

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The theory of games (or game theory) is a mathematical theory that deals with the general features of competitive situations. It involves strategic thinking, and studies the way people interact while making economic policies, contesting elections and other such decisions. There are various types of game models, which are based on factors, like the number of players participating, the sum of gains or losses and the number of strategies available. According to strategic reasoning, we can say that the phenomenon where each player responds best to the other is Nash Equilibrium. It is a solution concept of a non-cooperative game comprising of two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by only changing their own strategy. Nash equilibrium is best for both players, if all players abide by it. The normal form game (strategic form) does not incorporate any notion of sequence or time of the action of the players. In a normal form game, both players choose their strategy together without knowing the strategies of other players in the game. While the extensive form game is a game, which makes the temporal structure explicit i.e. it allows us to think more naturally about factors such as time. In an extensive game with perfect information there are no simultaneous moves and every player at any point of time is made aware of all the previous choices of all other players.In coalitional games, our focus is on what group of agents, rather than individual agents can achieve.

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