The Complete Idiot's Guide to Game Theory

Book description

Gain some insight into the game of life...

Game Theory means rigorous strategic thinking. It is based on the idea that everyone acts competitively and in his own best interest. With the help of mathematical models, it is possible to anticipate the actions of others in nearly all life's enterprises. This book includes down-to-earth examples and solutions, as well as charts and illustrations designed to help teach the concept. In The Complete Idiot's Guide® to Game Theory, Dr. Edward C. Rosenthal makes it easy to understand game theory with insights into:

? The history of the disciple made popular by John Nash, the mathematician dramatized in the film A Beautiful Mind

? The role of social behavior and psychology in this amazing discipline

? How important game theory has become in our society and why

Table of contents

  1. Cover
  2. Title Page
  3. Copyright Page
  4. Dedication
  5. Contents
  6. Introduction
  7. Part 1: The Basics
    1. 1 What Exactly Is Game Theory?
      1. The First Moves
      2. Game Basics
        1. Real Life vs. Mathematical Theories
        2. A Real-World Application
      3. Zero Sum Games
        1. Two Finger Morra
        2. Constant Sum Games
      4. Nonzero Sum Games
      5. Extensive Form Games
      6. Games with Perfect Information
      7. Games with Incomplete Information
      8. Cooperative Games
      9. Solving Games
      10. Consider the Other Player’s Position
    2. 2 Playing the Percentages
      1. The Not-So-Average World of Averages
        1. Simple Averages
        2. Weighted Averages
        3. Probabilities and Expected Values
        4. Maximin and Minimax
        5. Deciding Which Decision Criterion to Apply
      2. Decision Theory
        1. Strategic Choices
        2. The Math of Decisions
        3. In the Real World
      3. Decision Trees
        1. Creating the Decision Tree
        2. Play It Safe or Roll the Dice?
      4. Statistics, Data, and Trustworthy Conclusions
        1. Is That Swab Reliable?
        2. Reliable Tests and Unreliable Results
    3. 3 Zero Sum Games
      1. Set Up and Solution
        1. Mixed Strategies
        2. Pure Strategies and Domination
        3. The Equilibrium as a Solution
        4. War Games
        5. Constant Sum vs. Zero Sum
      2. Solving Zero Sum Games
        1. Mixed Strategy Equilibria
        2. Solve the Problem for NBC
        3. Do the Math
        4. The Analysis
        5. Solve the Problem for CBS
        6. Do the Math
        7. Saddle Up
        8. Supersized Strategy Sets
      3. Misconceptions About the Zero Sum Concept
    4. 4 Nonzero Sum Games
      1. Nonzero and Its Rich Flavor
      2. The Coordination Game
      3. Nash Equilibria
        1. Pure Strategy Nash Equilibria
        2. Mixed Strategy Nash Equilibria
        3. Equilibrium Payoffs
        4. Tweaking Payoffs and Shifting Strategy
      4. Narrowing Down the Solution Concept
        1. The Centipede Game
        2. Subgame Perfection
    5. 5 More Nonzero Sum Games
      1. Conflict and Cooperation
      2. The Prisoner’s Dilemma
        1. Joint Ventures
        2. Advertising Wars
        3. Resource Management
      3. The Game of Chicken
      4. Stag Hunt
      5. Transform Lose-Lose Outcomes to Win-Win
        1. Strong and Weak Prisoner’s Dilemmas
        2. Hostages and Enforcement
  8. Part 2: How Information Affects Games
    1. 6 Ignorance Is Not Bliss
      1. Perfect and Imperfect Information
      2. The Fog of Incomplete Information
      3. When Information Is Asymmetric
        1. Fool’s Gold
        2. Beyond Fool’s Gold
      4. Breaking Through the Fog
    2. 7 Signaling and Imperfect Info
      1. The Costs of Signaling
      2. Separating the Men from the Boys
        1. Do the Math
        2. The Analysis
      3. Pooling Everyone Together
        1. Do the Math
        2. The Analysis
      4. Signaling Quality
        1. Selling Lemons
        2. Market Failure and Insurance Nightmares
      5. Status Symbols as Strategies
        1. Expensive Signals
        2. The Handicap Principle
    3. 8 Nuanced Messages
      1. Reading Between the Lines
        1. Signaling to Investors
        2. Developing a Reputation
        3. Costly Commitment
      2. Threat Strategies
        1. Brinkmanship
        2. The Utility of Erratic Behavior
      3. Veiled Strategies
        1. Bearing Outsized Gifts
        2. Losing Your Cool
  9. Part 3: Getting Ahead by Working Together
    1. 9 An Overview of Cooperation
      1. Bargaining with Two Players
      2. Fair Division Problems
      3. Cooperative Games
      4. Voting and Game Theory
    2. 10 Bargaining Games
      1. Nash’s Standard Model
        1. Some Reasonable Assumptions
        2. The Nash Solution
        3. Application to Bankruptcy Problems
      2. The Kalai-Smorodinsky Solution
    3. 11 Fair Division Games
      1. I Cut, You Choose, and Related Methods
        1. The Steinhaus-Kuhn Lone Divider Method
        2. Other Divisible Procedures
      2. Proportionality and Envy-Free Allocation
        1. The Knaster-Steinhaus Procedure
        2. The Adjusted Winner Procedure
        3. Proportional Allocation
    4. 12 Cooperative Games
      1. Pay Your Fair Share
      2. We’re All on the Same Team
      3. The Shapley Value
        1. Do the Math
        2. The Analysis
      4. Other Cost and Profit Examples
        1. An Application to Power Generation
        2. Sharing the Profit
      5. Trying to Satisfy Everyone
    5. 13 Group Decision Games
      1. Voting as a Group Decision
      2. Veto Power
      3. Disappointments and Surprises
        1. Pairwise Comparisons
        2. Individual Rankings
      4. Problems with Proportionality
        1. Proportionality and Power
        2. Do the Math
        3. Other Power Indices
      5. The U.S. Electoral System
      6. Approval Voting
      7. The Search for a Perfect Method
  10. Part 4: Individual Values vs. the Group
    1. 14 Individual Gain vs. Group Benefit
      1. The Tragedy of the Commons
        1. The Commons Game with a Low Threshold
        2. The Commons Game with a High Threshold
        3. Ways Out of the Dilemma
      2. The Volunteer’s Dilemma
      3. The Free Rider Problem
      4. Some Experimental Results
    2. 15 Auctions and Eliciting Values
      1. Types of Auctions
        1. First-Price Auctions
        2. Second-Price Auctions
        3. Common-Value Auctions
        4. Other Auction Types
      2. Vickrey’s Insight
      3. Auctions in Practice
        1. Misuse of the Vickrey Auction
        2. Awarding TV Rights
        3. Auction Successes
    3. 16 Designing Games for Group Benefit
      1. Overcoming Individual Temptations
        1. Adverse Selection
        2. Moral Hazard
      2. Design for Truthful Revelation
        1. Cost-Sharing Schemes
        2. Vickrey-Clarke-Groves Mechanisms
        3. Do the Math
        4. The Analysis
        5. Internet Advertising
      3. Limitations of Mechanism Design
        1. Efficiency vs. Budgeting
        2. Computation and Collusion
  11. Part 5: Behavior in Games
    1. 17 Biology and Games
      1. Hawks, Doves, and Their Strategies
      2. Evolutionarily Stable Strategies
      3. Commitment and Other Virtues
      4. Altruism and Reciprocity
      5. The Excitable Brain
        1. Emotion Trumps Rationality
        2. fMRI Studies, Choices, and Neuro-What?
      6. What Future Research Could Mean
    2. 18 Aligning Theory with Behavior
      1. Utility Theory
        1. The Standard Economic Perspective
        2. Some Confounding Paradoxes
      2. Prospect Theory
        1. Gains vs. Losses
        2. Relative Value
        3. Risky Business
    3. 19 Behavioral Decision Theory
      1. Frames of Reference and Mental Accounting
      2. Anchoring and Relativity
      3. Intertemporal Choice
      4. The Endowment Effect
    4. 20 Strategic Behavior in the Lab
      1. Dictators and Trust in the Laboratory
        1. The Dictator Game
        2. Trust in Stages
      2. Behavior in the Ultimatum Game
        1. Baseline Results
        2. More Penetrating Findings
      3. Coordination Experiments
    5. 21 More Quirky Behavior
      1. Dominant Strategies in Practice
      2. Mixed Strategies in Practice
      3. Beauty Contests and Other Minds
      4. Prisoner’s Dilemma Experiments
        1. Early Findings
        2. Later Discoveries
      5. Our Limited Abilities
    6. 22 Repeated Games and Tendencies
      1. Why Study Repeated Games
        1. The Chain Store Paradox
        2. Repeated PDs
        3. Some Experimental Corroboration
      2. The Folk Theorem
      3. How Cooperation Can Evolve
        1. Axelrod’s Experiment
        2. Building Future Relationships
  12. Appendixes
    1. A Glossary
    2. B Sources, Resources, and Further Reading

Product information

  • Title: The Complete Idiot's Guide to Game Theory
  • Author(s): Edward C. Rosenthal
  • Release date: March 2011
  • Publisher(s): Alpha
  • ISBN: 9781101478844