ECON 2G03 Study Guide - Final Guide: Nash Equilibrium
Document Summary
Strategic interaction: the whole purpose of game theory is to determine the other person"s choice. Your wellbeing depends on your choice and your competitor (other player"s) choice, and vice versa. You need three things: list of players, a list of the actions that they can potentially take these lists are called action sets. Outcome of the game is what is called an action profile----> simply shows action taken by each player. An action profile describes the action of all players. Some actions are good for players, some are not: for each function you need a pay off function indicating how well off he is under each possible action profile. If you are missing any of these elements, you don"t have a game. One player (placer will flip a coin) and the other player (caller) will call whether he called heads or tails. If the caller gets it wrong, the placer gets a dollar and vice versa.