Overview
Game theory is a powerful tool for understanding strategic interactions among rational decision-makers. It provides a framework for analyzing situations where the outcome depends on the choices of multiple players. Backward induction is a key method within game theory that allows players to determin...
Key Terms
Example: In a pricing game, if both companies set the same price, neither can gain by changing it.
Example: In poker, the total amount won by one player is equal to the total amount lost by others.
Example: In a prisoner's dilemma, confessing is a dominant strategy for both players.
Example: A payoff matrix can show the outcomes of different pricing strategies between two companies.
Example: In rock-paper-scissors, a player may choose each option with equal probability.
Example: In a multi-stage game, players must make optimal decisions at every stage.