Game Theory

Presentation of group 13
December 18, 2014

Agenda
Meaning & Basic model
Different forms of Game
Examples Indian & Global

Agenda
Meaning & Basic model
Different forms of Game
Examples Indian & Global

Meaning

Game Theory: Game Theory is the formal study of

decision making where several players must make
choices that potentially affect the interest of other
players.
Formal study of conict and cooperation
Players, Information system, & Payoffs
Simultaneous moves
Cooperative vs Non-cooperative game
Payoff Matrix

Basic model
Matching Pennies

Head
Head

Tail

Tail

1, -1

-1, 1

-1, 1

1, -1

Agenda
Meaning & Basic model
Different forms of Game
Examples Indian & Global

Different forms of Game: Extensive

Games are played on trees

Player is specified with number at vertex
Can be called as decision tree

Forms of Game: Normal

Represented by matrix which shows payoffs

Gives payoffs of each player with possible
combinations of actions
Help in identifying Dominant Strategies(10,10) and
Nash Equilibrium (7,7)
Firm A

Oligopoly
Collaborate

Cheat

Collaborate

(10,10)

(5,15)

Cheat

(15,5)

(7,7)

Firm B

Forms of Game: Characteristic

function

Also known as cooperative game

Group of players may enforce cooperation
Strategies are chosen by consensus Decision
Making process
Mathematically given by, v: 2^[N]R
N = Number of players
v = value game or profit game

Describes how much collective payoff a set of players can

gain by forming coalition.(Also known as Grand Coalition)

Agenda
Meaning & Basic model
Different forms of Game
Examples Indian & Global

10

Example: Indian

11

Auction of players IPL 5

Most valuable player Ricky Ponting sold for a
base price
KKR wanted Ricky Ponting
Other franchisee being rational businessmen
KKR got 1st movers advantage

Example: Global

12

Price war between AMD and INTEL in 2002

AMD sold 8Mn more chips than previous Qtr for
lesser price resulted in 3% decrease in revenue
Mutual price cuts resulted in loss of revenue
INTEL and AMD would have done better if they
kept their price higher

Thank you

13