What's Game Theory

Game theory is a study of strategic decision making. Specifically, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers".

Who's who

John von Neumann

1903-1957 (aged 53)

• Hungarian and American
• Princeton University

http://en.wikipedia.org/wiki/John_von_Neumann

John Forbes Nash, Jr.

June 13, 1928 (age 86)

1994 Nobel Memorial Prize in Economic Sciences with game theorists Reinhard Selten and John Harsanyi

http://en.wikipedia.org/wiki/John_Forbes_Nash,_Jr.

Interview with John Nash

http://www.imdb.com/title/tt0268978/

Russell Crowe in the 2001 movie

A Beautiful Mind.

Rating 8.2/10

Prisoner's Dilemma

Dave

Henry

3 years in Jail

Prisoner's Dilemma

Offer ...

• 1 Year in Jail ... ถ้าสารภาพ (แต่อีกฝ่ายเงียบ)
• but ...
  • 5 Years ถ้าต่างสารภาพทั้งคู่
  • 10 Years ถ้าคุณเงียบ แต่อีกฝ่ายสารภาพ

Pay-off Matrix

Optimal Solution

Dominant Strategy

Prisoner's Dilemma in Real World

Cold War - Nuke

OPEC

• Overfishing
• Nation-states not restricting CO2 emissions
• Athletes using performance-enhancing drugs
• VCs bidding for Foursquare
• Advertisers determining ad budgets
• Other health-independent hygiene: shaving, deodorant, cutting hair
• Women wearing makeup

Suggested Technique ...

Tit for tat

• ตาต่อตาฟันต่อฟัน
• ยื่นหมู ยื่นแมว
• like BitTorren

* หน่วยเป็นล้านเหรียญ

* ต้นทุน 5 เหรียญ ต่อบาร์เรล

ราคาตลาดโลกเป็น 30, 20, 15 เหรียญ ต่อบาร์เรล

OPEC

What's next

Nash Equilibrium

Zero Sum Game

... the total of gain and loss is zero

Game of Chicken

... the worst possible outcome occurs when both players do not yield

7 Easy Ways To Use Game Theory To Make Your Life Better

In Salary Negotiations

To Save Money When Buying A Car

To Make Money In The Markets

In Real Estate Negotiations

In Fantasy Sports

In Poker

In Auctions