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NPTEL Online - IIT Bombay

Course Name Game Theory for
                          Economics
Department   Humanities and
                         Social Sciences,
                         IIT Kanpur
Instructor       Dr
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Strategic interdependence
 
Each agent’s payoff depends upon :
 
not only on its own decision, but
 
also on the decision taken by other agents
 
Therefore each agent has to act strategically
 
 
 
 
 

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Module 1: "Introduction to game theory"
Lecture 1: "Game Theory: Basic Introduction"

 
 
 Examples
 
Examples from everyday life 
Group Project
 
 
Students jointly working to write a term paper
 
A certain minimum amount of work required to complete the term
 
paper
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Strategic interdependence among students
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Players have to decide whether to dope or not based on their chances
of being caught
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Strategic interdependence b/w players and also IOC

 

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Module 1: "Introduction to game theory"
Lecture 1: "Game Theory: Basic Introduction"

  
 
Examples (contd
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)
 
 
Nim Game
 
Rules
 
Two player & two piles of matches
 
Game starts with player 1 and then players take turn
 
Each player can remove some number of matches if either pile has
 
matches remaining & can remove matches from one pile at a time
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Module 1: "Introduction to game theory"
Lecture 1: "Game Theory: Basic Introduction"

  
 
 Analysis of the NIM Game (balanced)
 
Two piles balanced if there are equal number of matches in each pile
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(x,y) refers to x matches in pile 1 and y matches in pile 2
 
Consider (1,1) - Player 2 wins
 
Consider (2,2) → After player 1’s first move,
 
It can be (0,2)
 
 
Then player 2 removes the remaining 2 matches and wins
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Module 1: "Introduction to game theory"
Lecture 1: "Game Theory: Basic Introduction"

  
 
 Description of a game
 
To describe a game one needs the following things
 
 
The Players
 
 
Who are involved
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Module 1: "Introduction to game theory"
Lecture 1: "Game Theory: Basic Introduction"

  
 
 Description of the game with examples
 
Class Project Example
 
Players: Students jointly writing the term paper
 
Strategies: Whether to write or not
 
 
Outcome: Completion/ Not completion of term paper
 
Drug Testing Example
 
Players: Athletes & IOC
 
Strategies: Athletes:- Whether to dope or not; IOC: which athletes should be
 
tested
 
 

Outcome: Athletes dope & Get Caught/Athletes dope & not get
Caught/Athletes do not dope & not get caught
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Payoffs: If the two coins match, player 1 pays Re1 to player 2;
 
 
otherwise player 2 pays Re1 to player 1
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Rules:
Decisions taken simultaneously
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Husband likes to see boxing
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Outcome:
Both end up watching boxing match
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Husband watches boxing, wife watches movie
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Payoffs: We will describe later
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