ECO205Y5 Chapter 5: Chapter 5 .docx
Document Summary
Non-cooperative game theory is where players are guided instead by self- interest. Any strategic situation can be modeled as game by specifying four basic elements: (1) players, (2) strategies, (3) payoffs, and (4) information. A strategy can be a contingent plan of action based on what another player does first. A strategy can involve a random selection from several possible actions. The actions underlying the strategies can range from the very simple to the very complex. Even when the player has only two actions available, the set of strategies may be much larger once we allow for contingent plans or for probabilities of playing the actions. The returns to the players at the conclusion of the game are called payoffs. Payoffs include the utilities players obtain from explicit monetary payments plus any implicit feelings they have about the outcome. This is sometimes a reasonable assumption, but it should be recognized as a simplification.
