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Simulation Game Theory
Simulation Game Theory
• EXPERIMENTATION
• TOO DANGEROUS IN THE LAB
• MONTE CARLO ANALYSIS (TWO AMERIRICAN
MATHEMATICIANS VON NEUMANN AND ULAN FOUND ACTUAL
EXPERIMENT TOO DANGEROUS
• SIMILAR TO GAMBLERS ROULETTE TABLE HENCE MONTE
CARLO
COMPETITIVE SITUATIONS
• MARKETING DIFFERENT BRANDS
• CAMPAIGNING FOR ELECTIONS
• FIGHTING MILITARY BATTLES
• CHARACTERISTICS OF COMPETITIVE GAME
1. NUMBER OF PLAYERS IS FINITE
2. EACH PLAYER HAS FINITE COURSE OF ACTION
3. EACH PLAYER ADAPTS ANY ONE COURSE OF ACTION
4. PAYOFF (BENEFIT OR LOSS) IS THE RESULT OF ACTION
5. PLAYERS DO NOT COMMUNICATE
6. PLAYERS ARE AWARE OF THE RULES BEFORE THE GAME
TYPES OF GAME
• N-PERSON GAME
• ZERO-SUM GAME
• STRATEGIES
• PURE STRATEGY - COURSE OF ACTION IRRESPECTIVE OF OPPONENTS
COURSE OF ACTION
• MIXED STRATEGY – ACTION AS PER PRE-ASSIGNED PROBABILITIES
2 FINGER MORRA GAME
• PERSON A AND B B ONE B TWO
FINGER FINGER
SIMULTATNEOUSLY RAISE
THEIR HANDS DISPLAYING A ONE -10 5
ONE OR TWO FINGERS FINGER
A1 1 -1 -1
A2 -2 2 -2
GAME THEORY:
• A game is a competitive activity in which
players contend with each other following a set
of rules. A game consists of elements such as
players, actions, information, strategies,
outcomes, payoffs and equilbria. The players
in the game are rival companies, hence the
decision makers in the organization take on
the roles of rival companies.
GAME THEORY:
A3 -5 4 11 0
PROBLEM
8 -1
3 0
0 -2
-7 -4
PROBLEM
6 12 7
7 9 8