1. Set 1: An overview
Erwin Widodo

2. What is game ?
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3. Game of skill Game of chance Game of strategy
Counting, etc
Dice, etc
P-S-R, etc
Game of chance
Game of strategy

4. Then, what is game theory?
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5. 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

6. 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

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

8. 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!
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9. 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?

10. 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!
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11. 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?

12. 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!
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13. 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?

14. 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

15. 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

16. 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)

17. 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.

18. 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

19. 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.