MGCR 293 Lecture Notes - Lecture 18: Game Theory, Normal-Form Game
28 Nov 2016
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Document Summary
General analysis of strategic interaction: each player attempts to anticipate actions of rivals, all decision agents are presumed rational. Why study: because we can select, design and formulate and effective strategy, because we can predict the outcome of strategic situations. A game is a competitive situation where two or more persons (organizations, firms) pursue their own interest and no person (organization, firm) can dictate the outcome. If i believe that my competitors are rational and act to maximize their own profits, how should i take their behavior into account when making my own profit maximizing decisions. My best decision depends on what others do, and what they do may depend on what they think i do. Game theory was initially developed in economics to study/understand economic behaviours in firms, markets and consumers. The use of game theory in the social sciences has expanded. Where both players move simultaneously, the later player is unaware of the earlier player"s actions.
