Set 1: An overview Erwin Widodo

What is game ? The Power of PowerPoint | thepopp.com

Game of skill Game of chance Game of strategy Counting, etc Dice, etc P-S-R, etc Game of chance Game of strategy

Then, what is game theory ? The Power of PowerPoint | thepopp.com

GT is a theory of DM GT considers how one should make decisions Everybody makes decision: Deep thought Almost automatic Decision links to goal Knowing the consequence of the options Decide the goal Select the path from the options An example: a civil engineer to build a bridge

When a chance takes place Decision becomes harder to make Example: CS wants to give prompt service At the same time also wants to reduce the telephone bill But…, how large is the future demand?  chance CS doesn’t know how mane telephone line to install Historical data + law of probability  balance excessive phone bill & defecting customer

GT is designed for complex situation The factors involves: Options Chance And …

Few examples Company A and B intend to buy 30 and 24 PC Salesman P is the supplier for both Salesman Q is the competitor If P and Q visit the same company, they divide the sales at that company, but P makes all sales at the other company If P and Q visit different company, each makes sales at the company visited Create the gain matrix for salesman P! The Power of PowerPoint | thepopp.com

Few examples 39 30 24 42 Challenge: Salesman Q Visit A Visit B Salesman P 39 30 24 42 Challenge: Analyze the calculation for each cell! How can we create gain matrix for salesman Q?

Few examples General P and Q want to control oil deposits A and B that P now controls. A is 30 acres; B is 24 acres General Q can only invade 1 area General P can only defend 1 area Their strength are matched, so if P and Q deploy their power to the same area, the result will be stalemate. Each gets half deposit while P retain the control of other area If they go to different area, each army will control the deposit at each area Create the oil deposit control matrix for general P! The Power of PowerPoint | thepopp.com

Few examples 39 30 24 42 Challenge: General Q Area A Area B General P 39 30 24 42 Challenge: Analyze the calculation for each cell! How can we create gain matrix for General Q?

Few examples Representative candidate P and Q compete to get delegation support from province A and B. P is the favorite. If both candidate visit the same province, then each will get half delegation and P will get all other province delegation. If they visit different province, each will get the support from province visited. A and B have 30 and 24 delegation respectively. Create the support matrix for candidate P! The Power of PowerPoint | thepopp.com

Few examples 39 30 24 42 Challenge: Candidate Q Province A Province B Candidate P 39 30 24 42 Challenge: Analyze the calculation for each cell! How can we create gain matrix for candidate Q?

Inference Although these three examples differ – one involves business, another is military conflict, and the 3rd is political campaign – they all involve GT The difference between these 3 examples and civil engineer example: “While the DM is trying to manipulate the environment, the environment is, on the contrary, trying to manipulate the DM ” This is the main characteristic of GT

Main terminology in GT the DMs in the game decision picked by DM PLAYER STRATEGY PAY OFF a certain situation as the interaction background setting the DMs in the game decision picked by DM the result of joint choice in term of rewards or punishments

Game G = f(Players,Strategies,Pay off) A complete illustration of the competition or cooperation that can be given as: G = f(Players,Strategies,Pay off)

Player A participant in the game Need not to be a single person If each member of a group has exactly the same feeling about how a game should turn out, then the members may be considered as a single player A player may be: a pair of double tennis player, a football team, a corporate, a country, etc.

Strategy A complete plan of action that describes what a player will do under all possible circumstances There are poor and good strategies In the afore few examples, each player has 2 strategy. However, in reality games strategies usually are very complex, so that they can not be explicitly written out. Example: chess games

Pay off Advantage or disadvantage within competition or cooperation Every player has access to it but in different quality and/or quantity Should be measured in similar unit in all players’ perspective Common examples of pay off are: profit, cost, market share, risk, sales, etc.