1. Game Theory Dr. Andrew L. H. Parkes “Economics for Business (2)” 卜安吉

2. April 5, 2012Business Economics 2: Day 42 Nobel Memorial Prize in Economics Eight game- theorists have won the Nobel Memorial Prize in Economic Sciences Eight game- theorists have won the Nobel Memorial Prize in Economic Sciences

3. April 5, 2012Business Economics 2: Day 43 John von Neuman A brilliant mathematician who’s paper in 1928 was a significant milestone in creating the field of game theory.

4. April 5, 2012Business Economics 2: Day 44 John von Neuman was a Hungarian-American mathematician and polymath who made major contributions to a vast number of fields. was a Hungarian-American mathematician and polymath who made major contributions to a vast number of fields. Von Neumann founded the field of game theory as a mathematical discipline. Von Neumann's proved his minimax theorem in 1928. Von Neumann founded the field of game theory as a mathematical discipline. Von Neumann's proved his minimax theorem in 1928.

5. April 5, 2012Business Economics 2: Day 45 John Von Neuman This theorem establishes that in zero-sum games with perfect information, there exists a pair of strategies for both players that allows each to minimize his maximum losses (hence the name minimax). This theorem establishes that in zero-sum games with perfect information, there exists a pair of strategies for both players that allows each to minimize his maximum losses (hence the name minimax).

6. April 5, 2012Business Economics 2: Day 46 Zero Sum Games Zero-sum games are those in which one person's gains exactly equal net losses of the other participant(s). Zero-sum games are those in which one person's gains exactly equal net losses of the other participant(s).

7. April 5, 2012Business Economics 2: Day 47 Perfect Information perfect information means that players know at each time all moves that have taken place so far, for example perfect information means that players know at each time all moves that have taken place so far, for example

8. April 5, 2012Business Economics 2: Day 48 A Nash Equilibrium … is the solution to a game involving two or more players when each player takes into account the other players’ known strategies. … is the solution to a game involving two or more players when each player takes into account the other players’ known strategies. A genius mathematician who created what has become known as the Nash Equilibrium. Jon Forbes Nash

9. April 5, 2012Business Economics 2: Day 49 A Nash Equilibrium A Nash Equilibrium results when no player can improve their situation as long as others do not change their positions. A Nash Equilibrium results when no player can improve their situation as long as others do not change their positions. John Nash is the subject of the Hollywood movie A Beautiful Mind. HollywoodA Beautiful Mind Russell Crowe plays his part …

10. April 5, 2012Business Economics 2: Day 410 Prisoner’s Dilemma The Prisoner’s Dilemma, is an aspect of game theory that examines why two individuals might not agree, even if it appears that it is best to do so. The Prisoner’s Dilemma, is an aspect of game theory that examines why two individuals might not agree, even if it appears that it is best to do so.

11. April 5, 2012Business Economics 2: Day 411 Prisoner’s Dilemma Action of A\Action of BCooperateDefect CooperateFairly good [+ 5]Bad [ - 10] DefectGood [+ 10]Mediocre [0] Cooperation is usually analyzed in game theory

12. April 5, 2012Business Economics 2: Day 412 Prisoner’s Dilemma  There are two players  And Two Choices  To either “Cooperate" or to “Defect“  The “Payoff Matrix” – is name for the set of Choices

13. April 5, 2012Business Economics 2: Day 413 Prisoner’s Dilemma  Each player gains when both cooperate  But if only one of the players cooperates  The defector gains more  If both defect, both lose (or gain very little)  However, both do not lose as much as the "cheated" (the cooperator)

14. April 5, 2012Business Economics 2: Day 414 Prisoner’s Dilemma The Origin of the Game  A Crime was committed  Two alleged criminals, both say I didn’t do it!  Police (Cops) play “good cop, bad cop”  Offer each a “DEAL” – I have a deal for YOU!  Confess and you get a lesser sentence! Therefore, this is the “Prisoner’s Dilemma.”

15. April 5, 2012Business Economics 2: Day 415 Prisoner’s Dilemma If the Game is Zero Sum then:  Both cooperate then result is 5  One cooperates: receives +10  One does not cooperate: receives – 10  No one cooperated both receive 0!  Therefore, zero sum game!