1. Game Theory A tool for modeling strategic interactions

2. Parts to a Game 1.A set of players 2.A set of actions available to each player 3.A payoff function that specifies how actions are mapped into payoffs for each player

3. A Penalty Kick in Soccer 1.Players = (Kicker, Goalie) 2.Actions for Kicker - (Kick Left, Kick Right) for Goalie – (Defend Kick Left, Defend Kick Right)

4. A Penalty Kick in Soccer 3.Payoffs – Kicker wins if Goalie guesses wrong and looses if Goalie guesses correctly. Goalie payoff is the opposite.

5. Normal Form Game A table that graphically represents all of the parts to a game.

6. Normal Form Game A table that graphically represents all of the parts to a game. Players Kicker Goalie Kick LeftKick Right Defend Kick LeftW,LL,W Defend Kick RightL,WW,L

7. Normal Form Game A table that graphically represents all of the parts to a game. Actions Kicker Goalie Kick LeftKick Right Defend Kick LeftW,LL,W Defend Kick RightL,WW,L

8. Normal Form Game A table that graphically represents all of the parts to a game. Payoffs (row player’s payoff listed first) Kicker Goalie Kick LeftKick Right Defend Kick LeftW,LL,W Defend Kick RightL,WW,L

9. Today’s Experiment Get into 8 groups of 3-4 people per group. Communication between groups is not allowed. Your grade is based upon the number of points that your group earns. Your points are the sum of your payoffs from the games. For each game you will be playing against another randomly selected group from the class.

10. Game of Chicken Other You Chicken 1 Tough 7 Chicken4,42,10 Tough10,20,0

11. Network Effects – Walkie Talkie Other You Don’t Buy 4 Buy 4 Don’t Buy4,44,0 Buy0,48,8

12. Game of Trade Other You TradeNo Trade 8 Trade6,60,10 No Trade10,04,4

13. Driving Game Other You Left SideRight Side 8 Left Side10,100,0 Right Side0,010,10

14. Cartel Game – Output Level Other You LowHigh 8 Low8,85,10 High10,56,6

15. Location Game Other You Little Rock 7 Fayetteville 1 Little Rock2,210,5 Fayetteville5,101,1

16. Rock Paper Scissors Other You Rock 5 Paper 1 Scissors 2 Rock5,50,1010,0 Paper10,05,50,10 Scissors0,1010,05,5