All My Bloody Notes Bloody Micro II Introduction


WTF are all those game theory jargons

  1. Action set: denoted as AiA_i. E.g. Ai={ai1,ai2}={Go Up,Go Down}A_i = \{a_{i_1}, a_{i_2}\} = \{\text{Go Up}, \text{Go Down}\}
  2. Pure strategy: a plan of actions i.e. what you will do at every single decision node. E.g. Si={si1,si2}={Go Up if j does X,Go Down if j does Y}S_i = \{s_{i_1}, s_{i_2}\} = \{\text{Go Up if \textit{j} does X}, \text{Go Down if \textit{j} does Y}\}. The word "Pure" specifies that there is no uncertainty as to what the player will do at each decision node.
  3. Nash equilibrium: a profile of strategy i.e. s=(s1,,sN)s^* = (s_1, \dots, s_N) such that no one wants to deviate. In other words, everyone's payoff is maximised given what others are doing.
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