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Strategy 1 Player A Strategy 1 Strategy 2: Normal Form of Game

The document defines the components of a game as players, rules specifying strategies, and payoffs rewarding outcomes. It explains the normal form representation of a game using a payoff matrix with strategies as rows and columns and payoffs for each player in each cell. Nash equilibrium is defined as a set of strategies where no player can increase their payoff by changing strategies given the other players' strategies. The procedure for finding a Nash equilibrium involves choosing the highest payoff response to each opponent's strategy until all combinations are evaluated.

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Ardi Manalu
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40 views2 pages

Strategy 1 Player A Strategy 1 Strategy 2: Normal Form of Game

The document defines the components of a game as players, rules specifying strategies, and payoffs rewarding outcomes. It explains the normal form representation of a game using a payoff matrix with strategies as rows and columns and payoffs for each player in each cell. Nash equilibrium is defined as a set of strategies where no player can increase their payoff by changing strategies given the other players' strategies. The procedure for finding a Nash equilibrium involves choosing the highest payoff response to each opponent's strategy until all combinations are evaluated.

Uploaded by

Ardi Manalu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Components of Game

1) Players.
2) Rules that specify the strategies that each player can choose.
3) Pay -offs or the reward of the game.

There are many types of games, but the one that we will use to explain first, is the s
Which mean the pay-off matrix will be in the "normal form" which is as follows
Normal Form of Game

Stra
Strategy 1
Player A
Strategy 2 -
In the "normal form" of game, the horizontal cell in the table specify the strategy of
A
and the vertical cell specify the strategy of Player A.
The fist number in the pay-off specifies the pay-off for Player A and
the second number in the pay-off specifies the pay-off for Player B.

Eqilibrium of a game
Equilibrium of a game is a situation which determines the outcome of a games .
There are many type of equilibrium of a game, for example; Nash Equlibrium, Max

Nash Equilibrium
Nash Equilibrium is a set of strategies such that each player is doing the best it can

Procedure to attain a Nash Equilibrium:


1) Assume one strategy of the rival, then choose the highest pay-off and mark the p
2) Move to the next strategy of the rival and do process 1) again until all the strateg
3) Repeat process 1) and 2) for the rival.
4) The combination of strategies that both competitors chose together is (are) the eq
Example
Nash Equilibrium
Str
Strategy 1
Player A
Strategy 2
Player

Maximim Equilibrium
Maximim Equilibrium is a set of strategies which each players maximize the minim

Procedure to attain a Maximin Equilibrium:


1) Start from the first strategy, write down the minimum pay-off of the strategy amo
2) Move on to next strategy and repeat process 1) until all strategeis are exhausted.
3) Compare and choose the strategy that gives the highest minimum pay-off.
4) Do the same for rival, the result from process 3) and 4) is the equilibrium.

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