what is game theory lawyer

What does a game theorist do?

A game theorist typically uses these elements, along with a solution concept of their choosing, to deduce a set of equilibrium strategies for each player such that, when these strategies are employed, no player can profit by unilaterally deviating from their strategy.

What is game theory in simple terms?

Game theory is the study of how and why people make decisions. (Specifically, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers".) It helps people understand parts of science and politics.

What is game theory in law and economics?

Economics and Game Theory: Law and economics books focus on economic analysis of judges' decisions in common law cases and have been mostly limited to contracts, torts, property, criminal law, and suit and settlement.

What is a game theory and how does it work?

Game theory studies interactive decision-making, where the outcome for each participant or "player" depends on the actions of all. If you are a player in such a game, when choosing your course of action or "strategy" you must take into account the choices of others.

What is an example of game theory?

The Prisoner's Dilemma is the most well-known example of game theory. Consider the example of two criminals arrested for a crime. Prosecutors have no hard evidence to convict them. However, to gain a confession, officials remove the prisoners from their solitary cells and question each one in separate chambers.

How is game theory used in real life?

Game theory is used extensively in various forms of collective bargaining and negotiation. For instance, during a strike or lockout, unions and management negotiate to raise wages. It is possible to maximize the welfare of both workers and control by using game theory to arrive at the optimal solution.

How is game theory used in law?

Game theory, the analysis of the logic of strategic behavior within interpersonal interactions, offers useful insights into how legal rules affect the way people behave.

Is game theory math or economics?

Game theory is a branch of mathematics used primarily in economics, political science, and psychology. This talk will define what a game is and discuss a variety of ways in which games can be classified and described.

Why is game theory important?

Game theory is a framework for understanding choice in situations among competing players. Game theory can help players reach optimal decision-making when confronted by independent and competing actors in a strategic setting.

Who won the Nobel prize for game theory?

John Nash, in full John Forbes Nash, Jr., (born June 13, 1928, Bluefield, West Virginia, U.S.—died May 23, 2015, near Monroe Township, New Jersey), American mathematician who was awarded the 1994 Nobel Prize for Economics for his landmark work, first begun in the 1950s, on the mathematics of game theory.

How do you do game theory?

0:043:59Intro to Game Theory and the Dominant Strategy EquilibriumYouTubeStart of suggested clipEnd of suggested clipAnd you need payoffs for the players you need to define the outcomes they can potentially getMoreAnd you need payoffs for the players you need to define the outcomes they can potentially get depending on how the game unfolds. And finally you need rules for the game.

Who created game theory?

John von NeumannIt has been developed over the many years since the term was first coined to what it is now: a theory used to “understand the strategic behaviour of decision makers who are aware that their decisions affect one another.” Game theory was initially developed by John von Neumann (1903–57) and Oskar Morgenstern (1902–77) ...

Who developed game theory?

Game theory in the form known to economists, social scientists, and biologists, was given its first general mathematical formulation by John von Neuman and Oskar Morgenstern ( 1944 ). For reasons to be discussed later, limitations in their formal framework initially made the theory applicable only under special and limited conditions. This situation has dramatically changed, in ways we will examine as we go along, over the past seven decades, as the framework has been deepened and generalized. Refinements are still being made, and we will review a few outstanding problems that lie along the advancing front edge of these developments towards the end of the article. However, since at least the late 1970s it has been possible to say with confidence that game theory is the most important and useful tool in the analyst’s kit whenever she confronts situations in which what counts as one agent’s best action (for her) depends on expectations about what one or more other agents will do, and what counts as their best actions (for them) similarly depend on expectations about her.

How does game theory help in neuroeconomics?

First, game theory has been used to predict the computations that individual neurons and groups of neurons serving the reward system must perform. In the best publicized example, Glimcher (2003) and colleagues have fMRI-scanned monkeys they had trained to play so-called ‘inspection games’ against computers. In an inspection game, one player faces a series of choices either to work for a reward, in which case he is sure to receive it, or to perform another, easier action (“shirking”), in which case he will receive the reward only if the other player (the “inspector”) is not monitoring him. Assume that the first player’s (the “worker’s”) behavior reveals a utility function bounded on each end as follows: he will work on every occasion if the inspector always monitors and he will shirk on every occasion if the inspector never monitors. The inspector prefers to obtain the highest possible amount of work for the lowest possible monitoring rate. In this game, the only NE for both players are in mixed strategies, since any pattern in one player’s strategy that can be detected by the other can be exploited. For any given pair of specific utility functions for the two players meeting the constraints described above, any pair of strategies in which, on each trial, either the worker is indifferent between working and shirking or the inspector is indifferent between monitoring and not monitoring, is a NE.

How to explain evolutionary game theory?

The principles of evolutionary game theory are best explained through examples. Skyrms begins by investigating the conditions under which a sense of justice—understood for purposes of his specific analysis as a disposition to view equal divisions of resources as fair unless efficiency considerations suggest otherwise in special cases—might arise. He asks us to consider a population in which individuals regularly meet each other and must bargain over resources. Begin with three types of individuals: 1 Fairmen always demand exactly half the resource. 2 Greedies always demand more than half the resource. When a greedy encounters another greedy, they waste the resource in fighting over it. 3 Modests always demand less than half the resource. When a modest encounters another modest, they take less than all of the available resource and waste some.

What is rationality in game theory?

Game theorists assume that players have sets of capacities that are typically referred to in the literature of economics as comprising ‘rationality’. Usually this is formulated by simple statements such as ‘it is assumed that players are rational’. In literature critical of economics in general, or of the importation of game theory into humanistic disciplines, this kind of rhetoric has increasingly become a magnet for attack. There is a dense and intricate web of connections associated with ‘rationality’ in the Western cultural tradition, and the word has often been used to normatively marginalize characteristics as normal and important as emotion, femininity and empathy. Game theorists’ use of the concept need not, and generally does not, implicate such ideology. For present purposes we will use ‘economic rationality’ as a strictly technical, not normative, term to refer to a narrow and specific set of restrictions on preferences that are shared by von Neumann and Morgenstern’s original version of game theory, and RPT. Economists use a second, equally important (to them) concept of rationality when they are modeling markets, which they call ‘rational expectations’. In this phrase, ‘rationality’ refers not to restrictions on preferences but to non -restrictions on information processing: rational expectations are idealized beliefs that reflect statistically accurately weighted use of all information available to an agent. The reader should note that these two uses of one word within the same discipline are technically unconnected. Furthermore, original RPT has been specified over the years by several different sets of axioms for different modeling purposes. Once we decide to treat rationality as a technical concept, each time we adjust the axioms we effectively modify the concept. Consequently, in any discussion involving economists and philosophers together, we can find ourselves in a situation where different participants use the same word to refer to something different. For readers new to economics, game theory, decision theory and the philosophy of action, this situation naturally presents a challenge.

How do economists test theories?

Economists have been testing theories by running laboratory experiments with human and other animal subjects since pioneering work by Thurstone (1931) . In recent decades, the volume of such work has become positively gigantic. The vast majority of it sets subjects in microeconomic problem environments that are imperfectly competitive. Since this is precisely the condition in which microeconomics collapses into game theory, most experimental economics has been experimental game theory. It is thus difficult to distinguish between experimentally motivated questions about the empirical adequacy of microeconomic theory and questions about the empirical adequacy of game theory.

What is it called when all agents are involved in a game?

Agents involved in games are referred to as players . If all agents have optimal actions regardless of what the others do, as in purely parametric situations or conditions of monopoly or perfect competition (see Section 1 above) we can model this without appeal to game theory; otherwise, we need it.

How can a player improve her outcome in a game?

In some games, a player can improve her outcome by taking an action that makes it impossible for her to take what would be her best action in the corresponding simultaneous-move game. Such actions are referred to as commitments, and they can serve as alternatives to external enforcement in games which would otherwise settle on Pareto-inefficient equilibria.

What is game theory?

The Bottom Line. Game theory is the process of modeling the strategic interaction between two or more players in a situation containing set rules and outcomes. While used in a number of disciplines, game theory is most notably used as a tool within the study of economics. The economic application of game theory can be a valuable tool to aide in ...

Why is game theory important?

Using game theory as a tool for financial analysis can be very helpful in sorting out potentially messy real-world situations, from mergers to product releases.

What are the assumptions in game theory?

Assumptions in Game Theory. As with any concept in economics, there is the assumption of rationality. There is also an assumption of maximization. It is assumed that players within the game are rational and will strive to maximize their payoffs in the game.

How many players are there in a game?

The number of players in a game can theoretically be infinite, but most games will be put into the context of two players. One of the simplest games is a sequential game involving two players.

What is a player in a game?

Players: A strategic decision-maker within the context of the game. Strategy: A complete plan of action a player will take given the set of circumstances that might arise within the game. Payoff: The payout a player receives from arriving at a particular outcome.

What is equilibrium in a game?

Equilibrium: The point in a game where both players have made their decisions and an outcome is reached.

What is a game?

Game: Any set of circumstances that has a result dependent on the actions of two of more decision-makers (players).

What is game theory?

e. Game theory is the study of mathematical models of strategic interaction among rational decision-makers. It has applications in all fields of social science, as well as in logic, systems science and computer science. Originally, it addressed zero-sum games, in which each participant's gains or losses are exactly balanced by those ...

When was game theory developed?

Game theory was developed extensively in the 1950s by many scholars. It was explicitly applied to evolution in the 1970s, although similar developments go back at least as far as the 1930s. Game theory has been widely recognized as an important tool in many fields. As of 2014.

What is a symmetric game?

A symmetric game is a game where the payoffs for playing a particular strategy depend only on the other strategies employed, not on who is playing them. That is, if the identities of the players can be changed without changing the payoff to the strategies, then a game is symmetric.

What is cooperative in a game?

A game is cooperative if the players are able to form binding commitments externally enforced (e.g. through contract law ). A game is non-cooperative if players cannot form alliances or if all agreements need to be self-enforcing (e.g. through credible threats ).

Why is game theory important?

Game theory has come to play an increasingly important role in logic and in computer science. Several logical theories have a basis in game semantics. In addition, computer scientists have used games to model interactive computations. Also, game theory provides a theoretical basis to the field of multi-agent systems.

Why is game theory important in project management?

Sensible decision-making is critical for the success of projects. In project management, game theory is used to model the decision-making process of players, such as investors, project managers, contractors, sub-contractors, governments and customers. Quite often, these players have competing interests, and sometimes their interests are directly detrimental to other players, making project management scenarios well-suited to be modeled by game theory.

When was game theory first applied?

In the 1970s , game theory was extensively applied in biology, largely as a result of the work of John Maynard Smith and his evolutionarily stable strategy. In addition, the concepts of correlated equilibrium, trembling hand perfection, and common knowledge were introduced and analyzed.

How is game theory used?

In all of the above fields, examples of how game theory is used abound: As a metaphor for decision theory. Economists often equate game theory with decision theory. Under that theory, each competitor in a game actually owns the tools (or "utilities") linked to a competition's outcomes. That's not exactly the same as game theory, however, ...

How does game theory help a company?

Consequently, by playing the game theory well, or at least better than their competitor , a company can gain a financial benefit by applying game theory skills and analysis to business decisions.

What is the role of hiding secrets in game theory?

Under that scenario, game theory participants learn key information that could sway the competition's outcome, but don't know if other competitors possess the same information.

What is the goal behind game theory?

Playing games to win is the goal behind game theory.

Why do police place the accused in different cells?

At that point, to gain more information from the accused, law enforcement officers will place each of the accused in different cells, ensuring they have no way to communicate with one another.

When was game theory invented?

Game theory dates back to 1944, when John von Neumann and Oskar Morgenstern used the term to explain a mathematical theory that sought to define and explain the strategic behavior of game participants who know that decisions made in the competition impacts all game participants - good or bad.

Who were the three economists who were awarded the Nobel Prize for Game Theory?

The application and analysis of game theory evolved over the next 50 years culminating in a Nobel Prize for economics for three economists - John Nash, John Harsanyi, and Reinhard Selten. The highly-coveted prize recognized their work in advancing the practical use of game theory in the field of economics.

What is game theory?

Game theory, branch of applied mathematics that provides tools for analyzing situations in which parties, called players, make decisions that are interdependent. This interdependence causes each player to consider the other player’s possible decisions, or strategies, in formulating strategy. A solution to a game describes the optimal decisions ...

Who developed game theory?

In fact, game theory was originally developed by the Hungarian-born American mathematician John von Neumann and his Princeton University colleague Oskar Morgenstern, a German-born American economist, to solve problems in economics.

What is a solution to a game?

A solution to a game describes the optimal decisions of the players, who may have similar, opposed, or mixed interests, and the outcomes that may result from these decisions. Although game theory can be and has been used to analyze parlour games, its applications are much broader.

What is extensive form in parlour games?

Extensive-form games can be described by a “game tree,” in which each turn is a vertex of the tree, with each branch indicating the players’ successive choices.

How to describe a game?

Extensive-form games can be described by a “game tree,” in which each turn is a vertex of the tree, with each branch indicating the players’ successive choices.

What is a one person game?

One-person games. One-person games are also known as games against nature. With no opponents, the player only needs to list available options and then choose the optimal outcome. When chance is involved the game might seem to be more complicated, but in principle the decision is still relatively simple.

What is a constant sum game?

The extent to which the goals of the players coincide or conflict is another basis for classifying games. Constant-sum games are games of total conflict, which are also called games of pure competition. Poker, for example, is a constant-sum game because the combined wealth of the players remains constant, though its distribution shifts in ...

What is game theory?

The game theory is said to be the science of strategies which comes under the probability distribution. It determines logical as well as mathematical actions that should be taken by the players in order to obtain the best possible outcomes for themselves in the games.

How is game theory applied to economics?

It is utilized in economics to understand the economic behaviours, such as behaviours of consumers, markets and firms . Game theory has been commonly used in social sciences as well. It is applied in the study of sociological, political and psychological behaviours. The use of analysis based on game theory is seen in biology too. In addition to behavioural prediction, game theory utilized in the development of theories of normative or ethical behaviour.

What is zero sum game?

There is a special kind of game studied in game theory , called zero-sum games. They are constant-sum games. In such games, the available resources can neither be increased nor decreased. Also, the total benefit in zero-sum games for all combination of strategies, always adds to zero. We can say that in zero-sum games, one wins and exactly one opponent loses. The sum of benefits of all the players for any outcome is equal to zero is called a zero-sum game. Thus, the interest of the two players is opposed.

What is the essence of game theory?

It considers the information for the players at each decision point. In-game theory, the interdependence of actions of players is the essence of the game. The game has two kinds of strategic interdependence – one is sequential, and the other is simultaneous. In sequential interdependence, players act in a sequence, aware of other players actions.

Is game theory interdependent?

outcome for each player depends upon the strategies of all. In other words, game theory deals with mathematical models of cooperation and conflicts between rational decision-makers.

How Game Theory Works

• The key pioneers of game theory were mathematician John von Neumann and economist Oskar Morgenstern in the 1940s.1Mathematician John Nash is regarded by many as providing the first significant extension of the von Neumann and Morgenstern work. The focus of game theory is t…

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Types of Game Theories

Examples of Game Theory

Limitations of Game Theory

Philosophical and Historical Motivation

Basic Elements and Assumptions of Game Theory

• 2.1 Utility
  An economic agent is, by definition, an entity withpreferences. Game theorists, like economists and philosophersstudying rational decision-making, describe these by means of anabstract concept called utility. This refers to some ranking,on some specified scale, of the subjective wel…
• 2.2 Games and Rationality
  All situations in which at least one agent can only act to maximizehis utility through anticipating (either consciously, or justimplicitly in his behavior) the responses to his actions by one ormore other agents is called a game. Agents involved in gamesare referred to as players. If all agents h…

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Uncertainty, Risk and Sequential Equilibria

Repeated Games and Coordination

Team Reasoning and Conditional Games

Commitment

Evolutionary Game Theory

Game Theory and Behavioral Evidence

Looking Ahead: Areas of Current Innovation

Game Theory Definitions

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Assumptions in Game Theory

Solving Sequential Games Using Backward Induction

The Bottom Line

Overview

History

Game types

Representation of games

General and applied uses

In popular culture

See also

References and further reading