Strategic interation (i.e., Game) Describing Components:
- Players
- Actions
- Information (what players know when they act)
- Outcomes
- Preferences (rank of outcomes)
Game tree (decision tree)
- Decision nodes (belong to only 1 person)
- Terminal nodes
- Branch (each node can be reached by only 1 path)
- Outcomes
- Information set (a collection of decision nodes)
Strategy is a complete contingent plan for a player in the game. A strategy must specify each action player will take at each decision node or information set. One information set has only one action.
Normal (Strategic) Form Representation of Games
Belief of a player is his/her assessment about the strategies of others in the game.
Mixed strategies is probability distribution over the set of pure strategies available to a player. Pure strategy is the strategy probability equal to 1.
Rationality: players behave consistently according to their preference (e.g., maximizing their own payoffs, minimizing opponent’s payoff, etc.).
Common Knowledge: game structure is the common knowledge among players.
A strategy profile is efficient if there is no other profile existing is more efficient (all players get equal or higher payoffs).
Contract: an agreement about behavior that is intended to be enforced. Contract is self-enforced if players have incentive to abide by the terms of the contract. Contract is externally-enforced if players motivated externally by a judge or arbitrator.
Reputation of the player can impact the strategy.
- Defendent: the person breaches the contract
- Plantiff: the person abide the contract