Modeling competitive situations:

The first substantial text on Game theory, "Theory of Games and Economic Behaviour" John Von Neumann and Oscar Morgenstern (Princeton University Press: 1943), was published more than 60 years ago. Its basic theory developed through the 1950s and 1960s. The important contributors to the development of Game theory were John Nash, Thomas Schelling, and others. Then the pace accelerated as the theory began to find applications to issues in such diverse fields as international relations, economics, business, and evolutionary Biology. We begin with some such examples, which will help you to understand the pulse of the subject.

Strategic games are distinguished from individual decision-making situations by the presence of significant interaction among the players. Games can be classified according to a variety of categories including the timing of play, the common and conflicting interests of the players, the number time an interaction occurs, the amount of information available to the players, the type of rules and the feasibility of coordinated action.

Learning the terminology is crucial for analyses. Players have strategies that lead to different outcomes with different associated payoffs. Rationality or consistent behaviour is assumed of all players.who must be aware of all of the relevant rules of conduct. In this unit, we have been introduced to simultaneous and sequential moves where a payer is unaware and in know of the rival's strategies. Also we have, learnt on the payoffs. The zero-sum game is framed such that it has gains equal losses. (zero payoff) whereas payoff remain constant in the constant sum case. Games played once or repeated envisaged different strategies. One- shot game calls for more harsh action against the rival. Players control information while dealing with opponents and more informed ones often send signals. When players agree on joint-action, a cooperative game results, otherwise, games become non-cooperative where such agreements are not enforceable.