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Introduction To Game Theory
Introduction To Game Theory
Outline
Lecture 1: Monday (10:15 11:00) Introduction to the basic concepts of game theory Lecture 2: Tuesday (11:15 12:00) Evolutionary games and graph-based data clustering Exercises: Tuesday (13:00 14:30) Reading groups and mini-presentations Lecture 3: Thursday (09:15 10:00) Graph labeling problems and graph transduction
Normal-form Games
We shall focus on nite, non-cooperative, simultaneous-move games in normal form, which are characterized by: A set of players: I = {1, 2, , n} (n 2) A set of pure strategy proles: S = S1 S2 Sn where each Si = {1, 2, , mi} is the (nite) set of pure strategies (actions) available to the player i A payoff function: : S n, (s) = (1(s),,n(s)), where i(s) (i=1n) represents the payoff (or utility) that player i receives when strategy prole s is played
Each player is to choose one element from his strategy space in the absence of knowledge of the choices of the other players, and payments will be made to them according to the function i(s). Players goal is to maximize their own returns.
Two Players
In the case of two players, payoffs can be represented as two m1 x m2 matrices (say, A for player 1 and B for player 2):
A = (ahk )
ahk = 1 (h,k)
Special cases:
B = (bhk )
bhk = 2 (h,k)
Zero-sum games: A + B = 0 (ahk = bhk for all h and k) Symmetric games: BT = A Doubly-symmetric games: A = AT = BT
Prisoner 2
Confess (defect) Confess (defect) Prisoner 1 Deny (cooperate) -25 , -1 -10 , -10
-3 , -3
ate
ds
trat egy
Prisoner 2
Confess (defect)
Do m in
ate
Prisoner 1
str ate
-10 , -10
gy
-25 , -1
-3 , -3
Wife
Soccer
Ballet
2,1
0,0
0,0
1,2
You
Rock
Scissors
Paper
Rock
0,0
1 , -1
-1 , 1
Me
Scissors
-1 , 1
0,0
1 , -1
Paper
1 , -1
-1 , 1
0,0
Mixed Strategies
A mixed strategy for player i is a probability distribution over his set Si of pure strategies, which is a point in the (mi-1)-dimensional standard simplex:
mi i = x i R m i : h = 1mi : x ih 0, and x ih = 1 h=1
Standard Simplices
mi = 2
mi = 3
x(s) = x isi
i=1
m1 m 2
Best Replies
Notational shortcut. Here, and in the sequel, if z and xii, the notation (xi,zi) stands for the strategy prole in which player iI plays strategy xi, while all other players play according to z. Player is best reply to the strategy prole xi is a mixed strategy xi*i such that ui(xi*,xi) ui(xi,xi) for all strategies xi i. The best reply is not necessarily unique. Indeed, except in the extreme case in which there is a unique best reply that is a pure strategy, the number of best replies is always innite. Indeed: When the support of a best reply includes two or more pure strategies, any mixture of these strategies must also be a best reply Similarly, if there are two pure strategies that are individually best replies, any mixture of the two is necessarily also a best reply
Nash Equilibria
The Nash equilibrium concept is motivated by the idea that a theory of rational decision-making should not be a self-destroying prophecy that creates an incentive to deviate for those who believe it. A strategy prole x is a Nash equilibrium if it is a best reply to itself, namely, if: ui(xi,xi) ui(zi,xi) for all i = 1n and all strategies zi i. If strict inequalities hold for all zi xi then x is said to be a strict Nash equilibrium. Theorem. A strategy prole x is a Nash equilibrium if and only if for every player iI, every pure strategy in the support of xi is a best reply to xi. It follows that every pure strategy in the support of any players equilibrium mixed strategy yields that player the same payoff.
Left
Middle
Right
Na sh e 10 , 2 quilib rium
Top
3,1
2,3
4,5
3,0
6,4
2,2
5,4
12 , 3
Bottom
5,6
4,5
9,7
Na
Wife
Na Ballet sh e
qui libr
ium
2,1
0,0
0,0
1,2
Nash equilibrium!
You
No
eq ash
rium uilib
! Rock
Scissors
Paper
Rock
0,0
1 , -1
-1 , 1
Me
Scissors
-1 , 1
0,0
1 , -1
Paper
1 , -1
-1 , 1
0,0
Theorem (Nash, 1951). Every nite normal-form game admits a mixedstrategy Nash equilibrium. Idea of proof. 1. 2. Dene a continuous map T on such that the xed points of T are in one-to-one correspondence with Nash equilibria. Use Brouwers theorem to prove existence of a xed point.
Together with factoring, the complexity of nding a Nash equilibrium is in my opinion the most important concrete open question on the boundary of P today. Christos Papadimitriou Algorithms, games, and the internet (2001)
Paradoxically, it has turned out that game theory is more readily applied to biology than to the eld of economic behaviour for which it was originally designed. John Maynard Smith Evolution and the Theory of Games (1982)
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Evolutionary Games
Introduced by John Maynard Smith (1973, 1974, 1982) to model the evolution of behavior in animal conicts. Assumptions: A large population of individuals belonging to the same species which compete for a particular limited resource This kind of conict is modeled as a symmetric two-player game, the players being pairs of randomly selected population members Players do not behave rationally but act according to a pre-programmed behavioral pattern Reproduction is assumed to be asexual Utility is measured in terms of Darwinian tness, or reproductive success
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Evolutionary Stability
A strategy is evolutionary stable if it is resistant to invasion by new strategies. Formally, assume: A small group of invaders appears in a large populations of individuals, all of whom are pre-programmed to play strategy x Let y be the strategy played by the invaders Let be the share of invaders in the (post-entry) population (0 < < 1) The payoff in a match in this bimorphic population is the same as in a match with an individual playing mixed strategy: w = y + (1 )x hence, the (post-entry) payoffs got by the incumbent and the mutant strategies are u(x,w) and u(y,w), respectively.
Theorem. A strategy x is an ESS if and only if it meets the following rst- and second-order best-reply conditions: 1. u(y,x) u(x,x) for all y for all y{x}
Note. From the conditions above, we have: ESS NE If x is a strict Nash equilibrium, then x is an ESS
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Existence of ESSs
Unlike Nash equilibria existence of ESSs is not guaranteed. Unique Nash equilibrium is x=(1/3,1/3,1/3)T Hence, all y are best replies to x Let the mutant be y=(1,0,0)T But u(y,y) = u(x,y), hence ESS = Rock You Scissors Paper
Rock
0,0
1 , -1
-1 , 1
Me
Scissors
-1 , 1
0,0
1 , -1
Paper
1 , -1
-1 , 1
0,0
Complexity Issues
Two questions of computational complexity naturally present themselves: What is the complexity of determining whether a given game has an ESS (and of nding one)? What is the complexity of recognizing whether a given x is an ESS for a given game?
Theorem (Etessami and Lochbihler, 2004). Determining whether a given two-player symmetric game has an ESS is both NP-hard and coNP-hard.
Theorem (Nisan, 2006). Determining whether a (mixed) strategy x is an ESS of a given two-player symmetric game is coNP-hard.
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Replicator Dynamics
Let xi(t) the population share playing pure strategy i at time t. The state of the population at time t is: x(t)= (x1(t),,xn(t)). Replicator dynamics (Taylor and Jonker, 1978) are motivated by Darwins principle of natural selection:
Notes. Invariant under positive afne transformations of payoffs (i.e., u u+, with>0) Standard simplex is invariant under replicator dynamics, namely, x(0) x(t), for all t > 0 (so is its interior and boundary)
The point m=(1/3,1/3,1/3)T is asymptotically stable (its eigenvalues have negative parts). But e1=(1,0,0)T is an ESS. Hence m cannot be an ESS (being in the interior, it would have to be the unique ESS).
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Characterization of ESSs (Hofbauer and Sigmund, 1988) For any doubly simmetric game with payoff matrix A, the following statements are equivalent: a) x ESS b) x is a strict local maximizer of (x) = xTAx over the standard simplex c) x is asymptotically stable in the replicator dynamics
x i (t + 1) = x i (t)
which inherits most of the dynamical properties of its continuous-time counterpart (e.g., the fundamental theorem of natural selection).
MATLAB implementation
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References
Texts on (classical) game theory J. von Neumann and O. Morgerstern. Theory of Games and Economic Behavior. Princeton University Press (1944, 1953). D. Fudenberg and J. Tirole. Game Theory. MIT Press (1991). M. J. Osborne and A. Rubinstein. A Course in Game Theory. MIT Press (1994). Texts on evolutionary game theory J. Weibull. Evolutionary Game Theory. MIT Press (1995). J. Hofbauer and K. Sigmund. Evolutionary Games and Population Dynamics. Cambridge University Press (1998). Computationally-oriented texts N. Nisan, T. Roughgarden, E. Tardos, and V. Vazirani (Eds.) Algorithmic Game Theory. Cambridge University Press (2007). Y. Shoham and K. Leyton-Brown. Multiagent Systems: Algorithmic, Game-Theoretic, and Logical Foundations. Cambridge University Press (2009). On-line resources http://gambit.sourceforge.net/ http://gamut.stanford.edu/ a library of game-theoretic algorithms a suite of game generators for testing game algorithms
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