Game theory-Another approach to decision-making

By Liu Jjin and Zhang Yixiao

Definition

Game theory is the science of strategy , studying strategic decision making.

It attempts to determine mathematically and logically the actions that "players" should take to secure the best outcomes for themselves in a wide array of "games.”

田忌赛马 is a typical example.

• zero-sum games A participant's gain of utility is exactly balanced by the losses

of the utility of other participants. If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero.

• positive sum games mutual gain• negative sum games mutual harm

Roughly classification

A particular “game” between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial.

A famous story : prisoners’ dilemma

The story of prisoners’ dilemma

Two criminals are captured by the police.Let’s call them Bonnie and Clyde.

Enough evidence : The minor crime of carrying an unregistered gun.Each would spend a year in jail.

Suspect: The major crime of a bank robbery.

Bonnie gets 8 years Bonnie gets 20 years

Bonnie goes free Bonnie gets 1 year

Clyde gets 20 years

Clyde gets 8 years

Clyde gets 1 year

Clyde goes free

Bonnie’s decision

Confess Remain silent

Clyde’sDecision

Confess

Remainsilent

In this game between two criminals suspected of committing a crime, the sentence that each receives depends both on his or her decision whether to confess or remain silent and on the decision made by the other

Benefit evaluation

In this case, confessing is a Dominant strategy for both Bonnie and Clyde. So in the end, both Bonnie and Clyde confess, and

both spend 8 years in jail.

What is the result

What can we learn from PD

To win a game or to successfully solve these To win a game or to successfully solve these questions, not only should you focus on your questions, not only should you focus on your own standpoint, but also you should realize own standpoint, but also you should realize what your opponent think.what your opponent think.

Cooperation can be difficult to maintain even when it would make both players in the game better off.

• EconomicsAlvin Roth Transformed Kidney Donation System

Where to apply

Where to apply

• Political science Game Theory Expert Analyzes Fiscal Cliff.

Where to apply

• Biological evolution – Examples on textbook

Where to apply

• Daily life– Marriage and the Art of Game Theory (VIDEO)

– They both involve people who are trying to further their own gains but are limited by the presence of another person.

–They both offer the possibility of a “cooperative strategy” , and a “non-cooperative strategy” , where it’s every man for himself.

–In both, the non-cooperative option is often the most tempting, but could result in death, whereas the cooperative option is annoying, but rarely fatal.

Where to apply

• Daily life The system help students be matched with

the right school and related applications

Thank you !