Week 21: Game Theory
Nash Equilibrium and Dominant Strategies 🔹 1. What is Game Theory? Game Theory is the study of strategic interactions where the outcome for each participant depends on the actions of all. It analyzes how players make decisions when their choices affect each other. Widely used in economics, politics, business, and biology. 🔹 2. Dominant Strategy A dominant strategy is the best choice for a player, no matter what the other players do. If a player has a dominant strategy, they will always prefer it since it yields a better or equal payoff regardless of opponents' actions. 🔹 3. Nash Equilibrium The Nash Equilibrium is a situation where no player can improve their outcome by changing their own strategy, assuming others keep theirs unchanged. Each player’s strategy is optimal given the strategies of others . There may be one or more Nash equilibria in a game. It represents a stable state where no one benefits by...