Professional Documents
Culture Documents
Part 1
Part 1
copyright 2012
do not circulate or reproduce without permission
At a Glance
• Six weeks
– Lecture videos posted at the beginning of week; in-lecture quizzes
– Weekly review quiz
– Weekly games in Lab
– Weekly “screenside chat”
• Resources
– Lecture videos
– Slides
– Booklet
Assignments, Grading and Certificate
• Grades
– Weekly problem sets and final exam count towards the grade
• Problem sets 70%
• Final exam 30%
– Quizzes (both in-video and weekly review) and labs don’t count towards grade
– You can answer as often as you like, but only first attempt counts
• Certificate
– Cumulative score above 70% earns you an (electronic) certificate of completion
– Cumulative score above 90% earns you an (electronic) designation “with distinction”
– No, this doesn’t count towards a Stanford degree, sorry…
• Honor code
– By all means consult with each other, but please don’t share answers to quizzes, problem sets, or final
exam. Not directly, and indirectly by posting them anywhere. Thanks.
Community Support
• Discussion forums on class page
– Post questions, answers
– Find and fix bugs
– Translate to other languages; etc.
– We will acknowledge the most useful contributors
• Study groups
– Arrange on Study Group forum
– Conduct on Google+ Hangout, or email
Introduction: Game Theory
• Models of strategic interactions:
– Outcomes depend on more than one player’s decision
• Methodology/tool box
– tools will vary with the applications!
Questions About Models
• Normal Forms
• Extensive Forms
• Repeated Games
• But the expected capture and expended calorie rates are interactive
Predator/Prey
Consider
the
following
modified
game:
• ...
The Normal Form
• N={1,...,n} the set of players
Revolt Not
Revolt 1, 1 -1,0
Not 0,-1 0,0
A Simple Collective-Action Game
Revolt Not
Revolt 1, 1 -1,0
Not 0,-1 0,0
N={1,2}
A1={Revolt, Not} A2={Revolt, Not}
u1(Revolt, Revolt)=1 ....
Quiz
Consider
the
following
normal
form:
• N={1,
2}
• Ai={Le<,
Right}
• Player
1
prefers
to
choose
the
same
acBon
as
player
2:
u1
(a1=a2)=1,
u1(a1≠a2)=-‐1
• Player
2
prefers
to
choose
the
opposite
acBon
from
player
1:
u2(a1=a2)=-‐1,
u2(a1≠a2)=1
Quiz
1
\
2
Le+
Right
Le+
1,
-‐1
Right
?,
?
What
should
be
filled
in
(?,
?):
a)
1,
-‐1
;
b) 0,
1
;
c) -‐1,
1
;
d) 1,
0
.
Quiz:
ExplanaFon
(c)
is
true.
• In
(?,
?),
a1=
Right
and
a2=
Le<,
such
that
a1
≠
a2.
• From
the
uBlity
funcBon,
we
know
u1(a1≠a2)=-‐1
and
u2
(a1≠a2)=1.
• Thus
the
payoff
is
(-‐1,
1).
The utility function
• What should the payoffs be?
L R
L 1,1 0,0
R 0,0 1,1
Sidewalk Shuffle
Team Games
• For any two players i and j and any action profile a, it is the
case that ui(a) = uj(a)
R P S
H T R 0,0 -1,1 1,-1
H 1,-1 -1,1 P 1,-1 0,0 -1,1
T -1,1 1,-1 S -1,1 1,-1 0,0
Matching Pennies Rock-Paper-Scissors
(Rochambeau)
Zero-Sum Games
• Limited to two-person games
• u1(a1,a2) + u2(a1,a2) = 0
• Most of the early work in game theory was on two-person zero-sum games
Quiz
Consider
the
following
zero-‐sum
game:
• Dominance
• Equilibrium
Dominance
• A strategy always leads to at least as high (higher) payoff than
another
ui (ai, a-i ) > ui (ai’, a-i ) for all ai’ and a-i
Predator/Prey
Confess Silent
Confess -4,-4 0,-5
Silent -5,0 -1,-1
The Classic Game with Strictly Dominant
Strategies
• Prisoners’ Dilemma
Confess Silent
Confess -4,-4 0,-5
Silent -5,0 -1,-1
The Classic Game with Strictly Dominant
Strategies
• Prisoners’ Dilemma
Confess Silent
Confess -4,-4 0,-5
Silent -5,0 -1,-1
The Classic Game with Strictly Dominant
Strategies
• Prisoners’ Dilemma
Confess Silent
Confess -4,-4 0,-5
Silent -5,0 -1,-1
A Game with Weakly Dominant
Strategies
Movie Home
Movie 1, 1 0,0
Home 0,0 0,0
Quiz
Consider
the
game:
1
\
2
Movie
Home
Movie
2,
1
1,
1
Home
0,
1
0,
2
Quiz
“Movie”
is
a
“
”
dominant
strategy
for
player
1,
and
“Home”
is
a
“
”
dominant
strategy
for
player
2.
What
should
be
filled
in
the
blanks?
a) Strictly;
Strictly.
b) Strictly;
weakly
(not
strictly).
c) Weakly
(not
strictly);
strictly.
d) Weakly
(not
strictly);
weakly
(not
strictly).
Quiz:
Explana?on
(b)
is
true.
• “Movie”
is
a
strictly
dominant
strategy
for
player
1
because
– When
2
plays
Movie,
1
gets
2
from
Movie
and
0
from
Home;
When
2
plays
Home,
1
gets
1
from
Movie
and
0
from
Home.
(Movie
is
always
strictly
beHer.)
• “Home”
is
a
weakly
(not
strictly)
dominant
strategy
for
player
2
because
• When
1
plays
Movie,
2
gets
1
from
either
Movie
or
Home
(so
is
indifferent);
When
1
plays
Home,
2
gets
1
from
Movie
and
2
from
Home.
(Home
is
strictly
beHer.)
Normal Form
• An example of a normal form game
• Mixed Strategies
• Existence of Equilibrium
Nash Equilibrium
• Best Responses
• Mixed Strategies
• Existence of Equilibrium
Best responses
• Game: (N, (Ai)i , (ui)i)
Consider
the
collec:ve-‐ac:on
game:
1
\
2
Revolt
Not
Revolt
1,
1
-‐1,
0
Not
0,
-‐1
0,
0
Quiz
When
player
1
plays
“Not”,
for
player
2
a) “Revolt”
is
a
best
response.
b) “Revolt”
is
a
dominant
strategy.
c) “Not”
is
a
best
response.
d) “Not”
is
a
dominant
strategy.
Quiz:
Explana:on
(c)
is
true.
• When
player
1
plays
“Not”,
player
2
gets
-‐1
from
“Revolt”
and
0
from
“Not”.
Thus
“Not”
is
a
best
response.
• No
strategy
is
a
dominant
strategy:
– When
the
other
player
plays
“Not”,
it
is
strictly
beEer
to
play
“Not”;
– When
the
other
player
plays
“Revolt”,
it
is
strictly
beEer
to
play
“Revolt”;
– No
strategy
always
dominates
the
other
strategy.
Nash Equilibrium
• Best Responses
• Mixed Strategies
• Existence of Equilibrium
Nash Equilibrium
• A profile of strategies (a1,...,an) is a (pure strategy) Nash
equilibrium if ai is a best response to a-i for all i
L P
L 3,1 0,0
P 0,0 1,3
``Battle of the Sexes’’ Game
• There are two pure strategy Nash equilibria:
L P
L 3,1 0,0
P 0,0 1,3
Nash Equilibrium in technology
adoption:
No dominant strategies
Two equilibria: Old, Old and New, New
Old New
Old 1,1 0,0
New 0,0 2,2
Nash Equilibrium in technology
adoption:
No dominant strategies
Two equilibria: Old, Old and New, New
Old New
Old 1,1 0,0
New 0,0 2,2
A Simple Collective-Action Game
Revolt Not
Revolt 1, 1 -2,0
Not 0,-2 0,0
Revolt Not
Revolt 1, 1 -2,0
Not 0,-2 0,0
Consider
a
seller-‐buyer
game:
• No regrets