3 rd Week

Strategic Games with Pure Strategies

Game Theory
• Game theory basically analyses on the assumption that the individual
behaves rationally.

• Rationality can be briefly defined as follows: It is the individual's being

aware of the alternatives in front of him/her, forming expectations on
unknowns in the game, having clear preferences about his/her alternatives,
and determining his/her actions as a result of optimization.

• So basically, in game theory, a rational individual has certain actions,

certain outcomes of those actions, and certain preferences about
outcomes.
Game Theory
• In static games, players have full knowledge of the structure of the
game and choose their actions simultaneously.
• The basic equilibrium concept used in solving such games is the Nash
equilibrium.
• Games that occur when players act sequentially, not simultaneously,
are dynamic games. Information

Complete Missing

Static Strategically Formatted Games Bayesian Games

Time Fully Knowledgeable Incomplete Information

Dynamic
Expanding Format Games Expanding Format Games
Game Theory
• In this section we will study games in which players act simultaneously under
complete (full) knowledge.
• What is meant by complete information is that the utility function of each player
in the game (the function that determines the utility that players get as a result of
the actions they choose) is within the knowledge of all players.
• There is no time in strategically shaped games.
• Each player chooses his move once and at the same time.
• What is meant by simultaneous here means that the players cannot observe each
other's movements before they move.
• Of course, one player may have acted before the other, but if the other player
cannot see it, the definition of simultaneous can be used in this sense.
• In a game the players can be individuals, businesses, countries, etc.
Game Theory - Example
Let's try to understand the general structure of game theory through a small
example:
• 2 people are caught sharing a stolen goods.
• Because these people were caught with stolen goods, they are accused by
the police and will be punished.
• However, there is no evidence that they actually committed the crime.
• For this reason, it is important that they confess that they have committed
the crime.
• For this reason, the police think that it would be more accurate to question
these two people in separate cells.
• The goal is to get them to confess their crimes.
Game Theory - Example
• The circumstances of the offenders' confession or non-confession are
summarized below:
üIf one of them confesses and the other does not; Those who confess is
sentenced to 1 year and those who do not confess is sentenced to 5 years.
üIf both confess, there will be no need for proof and each of them will be
sentenced to 4 years.
üIf both do not confess, they will not be charged with theft, they will only be
sentenced to 2 years for possession of stolen goods.
Game Theory - Example
• This brings us to a problem called the Prisoners' Dilemma.
• The only thing players care about here is how many years they will be
sentenced.
• We can also express this game with a table:
2nd player
Don’t Confess (D) Confess (C)
Don’t Confess (D) -2, -2 -5, -1
1st player
Confess (C) -1, -5 -4, -4
Game Theory - Example
• Here, the 1st player is the 1st offender, that is, the row player and the
2nd player refers to the 2nd offender, that is, the column player.
• The numbers in the table indicate the benefits corresponding to the
actions of the players.
• The 1st number indicates the benefit level of 1st player, and the 2nd
number indicates the benefit level of the 2nd player.
2nd player
Don’t Confess (D) Confess (C)
Don’t Confess (D) -2, -2 -5, -1
1st player
Confess (C) -1, -5 -4, -4
Game Theory - Example
• Each player has two strategies: confess and don’t confess.
• The strategy of confession is a kind of cooperation among themselves.
In other words, it is the cooperation (solidarity) between them.
• The admit strategy can be thought of as a deviation from this
cooperation.
2nd player
Don’t Confess (D) Confess (C)
Don’t Confess (D) -2, -2 -5, -1
1st player
Confess (C) -1, -5 -4, -4
Game Theory - Example
• Now let's express this game with mathematical notations:
Set of players: N = {1, 2}
Set of strategies or moves: S1 = S2 = {D, C}

2nd player
Don’t Confess (D) Confess (C)
Don’t Confess (D) -2, -2 -5, -1
1st player
Confess (C) -1, -5 -4, -4
Game Theory - Example
Utility functions showing players' preferences:
u1 = (D,D) = -2 u2 = (D,D) = -2
u1 = (D,C) = -5 u2 = (D,C) = -1
u1 = (C,D) = -1 u2 = (C,D) = -5
u1 = (C,C) = -4 u2 = (C,C) = -4
The game itself: G = (S1, S2; u1, u2)
2nd player
Don’t Confess (D) Confess (C)
Don’t Confess (D) -2, -2 -5, -1
1st player
Confess (C) -1, -5 -4, -4
 Game Theory - Example
u1 = (D,D) = -2 u2 = (D,D) = -2
u1 = (D,C) = -5 u2 = (D,C) = -1
u1 = (C,D) = -1 u1 = (C,D) = -5
u1 = (C,C) = -4 u1 = (C,C) = -4
2nd player
S1 S2
Don’t Confess (D) Confess (C)
S1 u1(S1, S1), u2(S1, S1) u1(S1, S2), u2(S1, S2)
Don’t Confess (D) -2, -2 -5, -1
1st player S2 u1(S2, S1), u2(S2, S1) u1(S2, S2), u2(S2, S2)
Confess (C) -1, -5 -4, -4
Certain Dominance in Pure Strategies
• In game theory, strategies are basically divided into Pure and Mixed
strategies.

• A pure strategy is one that is played with certainty.

• Mixed strategy, on the other hand, is a strategy played with a certain

probability.
Dominant Strategy
• Returning to the prisoner's dilemma game, we see that each player's well-being depends
on the other player's action.
• If one player plays the confess move, the other player will also play the confess move.
• Because in this case, s/he will be sentenced to 4 years. Otherwise, if s/he doesn't
confess, s/he will be sentenced to 5 years.
• Similarly, if one player does not confess, the other does.
• Because in this case, s/he will be sentenced to 1 year. Otherwise, if s/he does not
confess, S/he will be sentenced to 2 years.
• So for any player, no matter what the other player plays, the confession move is always
rational.
• Such strategies are called dominant strategies.
• One player's strategy that is always optimal, independent of the strategies of other
players, is called the dominant strategy.
Dominant Strategy
• If one player's strategy always produces a better outcome for all other
players' strategies, it is called a strictly dominant strategy.
• Based on this definition, the strategy that will never be played is
defined as the definitely prisoner strategy.
• Rational players certainly never play definitely prisoner strategies.
• So both players delete their prisoner strategy and never play.
Dominant Strategy
• The “don’t confess” move in the example game is the definitely
prisoner strategy.
• So, the “confess” movement is the strictly dominant strategy.
• Therefore, the “don’t confess” move is an irrational strategy to never
play.
2nd player
• That's why it's deleted.
Don’t Confess (D) Confess (C)
Don’t Confess (D) -2, -2 -5, -1
1st player
Confess (C) -1, -5 -4, -4
Dominant Strategy
• As a result, both players play their move to the "confess" move.
• Therefore, the balance behaviour in the game:
(confess, confess) = (C,C)

• Of course, the important point here is that a rational player must

know that other players will play such a strategy.
• So everyone should know that each other is rational.
• This is called rationality being common knowledge.
Continuous Elimination Method
Continuous Elimination Method
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Weak Dominance In Pure Strategies
• Sometimes one strategy is better than some of the other strategies,
but it may be equally beneficial for others.
Weak Dominance In Pure Strategies
Weak Dominance In Pure Strategies