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Mertens-stable Equilibrium
In game theory, Mertens stability is a solution concept used to predict the outcome of a non-cooperative game. A tentative definition of stability was proposed by Elon Kohlberg and Jean-François Mertens for games with finite numbers of players and strategies. Later, Mertens proposed a stronger definition that was elaborated further by Srihari Govindan and Mertens. This solution concept is now called ''Mertens stability'', or just ''stability''. Like other refinements of Nash equilibrium used in game theory stability selects subsets of the set of Nash equilibria that have desirable properties. Stability invokes stronger criteria than other refinements, and thereby ensures that more desirable properties are satisfied. Desirable Properties of a Refinement Refinements have often been motivated by arguments for admissibility, backward induction, and forward induction. In a two-player game, an admissible decision rule for a player is one that does not use any strategy that is weakly d ...
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Game Theory
Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has applications in all fields of social science, as well as in logic, systems science and computer science. Originally, it addressed two-person zero-sum games, in which each participant's gains or losses are exactly balanced by those of other participants. In the 21st century, game theory applies to a wide range of behavioral relations; it is now an umbrella term for the science of logical decision making in humans, animals, as well as computers. Modern game theory began with the idea of mixed-strategy equilibria in two-person zero-sum game and its proof by John von Neumann. Von Neumann's original proof used the Brouwer fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathema ...
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Proper Equilibrium
Proper equilibrium is a refinement of Nash Equilibrium due to Roger B. Myerson. Proper equilibrium further refines Reinhard Selten's notion of a trembling hand perfect equilibrium by assuming that more costly trembles are made with significantly smaller probability than less costly ones. Definition Given a normal form game and a parameter \epsilon > 0, a totally mixed strategy profile \sigma is defined to be \epsilon-proper if, whenever a player has two pure strategies s and s' such that the expected payoff of playing s is smaller than the expected payoff of playing s' (that is u(s,\sigma_)), then the probability assigned to s is at most \epsilon times the probability assigned to s'. The strategy profile of the game is said to be a proper equilibrium if it is a limit point, as \epsilon approaches 0, of a sequence of \epsilon-proper strategy profiles.


Example

The game to the right is a var ...
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Homotopy
In topology, a branch of mathematics, two continuous functions from one topological space to another are called homotopic (from grc, ὁμός "same, similar" and "place") if one can be "continuously deformed" into the other, such a deformation being called a homotopy (, ; , ) between the two functions. A notable use of homotopy is the definition of homotopy groups and cohomotopy groups, important invariants in algebraic topology. In practice, there are technical difficulties in using homotopies with certain spaces. Algebraic topologists work with compactly generated spaces, CW complexes, or spectra. Formal definition Formally, a homotopy between two continuous functions ''f'' and ''g'' from a topological space ''X'' to a topological space ''Y'' is defined to be a continuous function H: X \times ,1\to Y from the product of the space ''X'' with the unit interval , 1to ''Y'' such that H(x,0) = f(x) and H(x,1) = g(x) for all x \in X. If we think of the second ...
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Closure (topology)
In topology, the closure of a subset of points in a topological space consists of all points in together with all limit points of . The closure of may equivalently be defined as the union of and its boundary, and also as the intersection of all closed sets containing . Intuitively, the closure can be thought of as all the points that are either in or "near" . A point which is in the closure of is a point of closure of . The notion of closure is in many ways dual to the notion of interior. Definitions Point of closure For S as a subset of a Euclidean space, x is a point of closure of S if every open ball centered at x contains a point of S (this point can be x itself). This definition generalizes to any subset S of a metric space X. Fully expressed, for X as a metric space with metric d, x is a point of closure of S if for every r > 0 there exists some s \in S such that the distance d(x, s) < r (x = s is allowed). Another way to express this is to ...
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Čech Cohomology
In mathematics, specifically algebraic topology, Čech cohomology is a cohomology theory based on the intersection properties of open covers of a topological space. It is named for the mathematician Eduard Čech. Motivation Let ''X'' be a topological space, and let \mathcal be an open cover of ''X''. Let N(\mathcal) denote the nerve of the covering. The idea of Čech cohomology is that, for an open cover \mathcal consisting of sufficiently small open sets, the resulting simplicial complex N(\mathcal) should be a good combinatorial model for the space ''X''. For such a cover, the Čech cohomology of ''X'' is defined to be the simplicial cohomology of the nerve. This idea can be formalized by the notion of a good cover. However, a more general approach is to take the direct limit of the cohomology groups of the nerve over the system of all possible open covers of ''X'', ordered by refinement. This is the approach adopted below. Construction Let ''X'' be a topological space, and l ...
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Boundary (topology)
In topology and mathematics in general, the boundary of a subset of a topological space is the set of points in the closure of not belonging to the interior of . An element of the boundary of is called a boundary point of . The term boundary operation refers to finding or taking the boundary of a set. Notations used for boundary of a set include \operatorname(S), \operatorname(S), and \partial S. Some authors (for example Willard, in ''General Topology'') use the term frontier instead of boundary in an attempt to avoid confusion with a different definition used in algebraic topology and the theory of manifolds. Despite widespread acceptance of the meaning of the terms boundary and frontier, they have sometimes been used to refer to other sets. For example, ''Metric Spaces'' by E. T. Copson uses the term boundary to refer to Hausdorff's border, which is defined as the intersection of a set with its boundary. Hausdorff also introduced the term residue, which is defi ...
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Cohomology
In mathematics, specifically in homology theory and algebraic topology, cohomology is a general term for a sequence of abelian groups, usually one associated with a topological space, often defined from a cochain complex. Cohomology can be viewed as a method of assigning richer algebraic invariants to a space than homology. Some versions of cohomology arise by dualizing the construction of homology. In other words, cochains are functions on the group of chains in homology theory. From its beginning in topology, this idea became a dominant method in the mathematics of the second half of the twentieth century. From the initial idea of homology as a method of constructing algebraic invariants of topological spaces, the range of applications of homology and cohomology theories has spread throughout geometry and algebra. The terminology tends to hide the fact that cohomology, a contravariant theory, is more natural than homology in many applications. At a basic level, this has to do ...
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Normal-form Game
In game theory, normal form is a description of a ''game''. Unlike extensive form, normal-form representations are not graphical ''per se'', but rather represent the game by way of a matrix. While this approach can be of greater use in identifying strictly dominated strategies and Nash equilibria, some information is lost as compared to extensive-form representations. The normal-form representation of a game includes all perceptible and conceivable strategies, and their corresponding payoffs, for each player. In static games of complete, perfect information, a normal-form representation of a game is a specification of players' strategy spaces and payoff functions. A strategy space for a player is the set of all strategies available to that player, whereas a strategy is a complete plan of action for every stage of the game, regardless of whether that stage actually arises in play. A payoff function for a player is a mapping from the cross-product of players' strategy spaces to that ...
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Extensive-form Game
An extensive-form game is a specification of a game in game theory, allowing (as the name suggests) for the explicit representation of a number of key aspects, like the sequencing of players' possible moves, their choices at every decision point, the (possibly imperfect) information each player has about the other player's moves when they make a decision, and their payoffs for all possible game outcomes. Extensive-form games also allow for the representation of incomplete information in the form of chance events modeled as " moves by nature". Finite extensive-form games Some authors, particularly in introductory textbooks, initially define the extensive-form game as being just a game tree with payoffs (no imperfect or incomplete information), and add the other elements in subsequent chapters as refinements. Whereas the rest of this article follows this gentle approach with motivating examples, we present upfront the finite extensive-form games as (ultimately) constructed here. This ...
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Forward Induction
In game theory, a solution concept is a formal rule for predicting how a game will be played. These predictions are called "solutions", and describe which strategies will be adopted by players and, therefore, the result of the game. The most commonly used solution concepts are equilibrium concepts, most famously Nash equilibrium. Many solution concepts, for many games, will result in more than one solution. This puts any one of the solutions in doubt, so a game theorist may apply a refinement to narrow down the solutions. Each successive solution concept presented in the following improves on its predecessor by eliminating implausible equilibria in richer games. Formal definition Let \Gamma be the class of all games and, for each game G \in \Gamma, let S_G be the set of strategy profiles of G. A ''solution concept'' is an element of the direct product \Pi_2^; ''i.e''., a function F: \Gamma \rightarrow \bigcup\nolimits_ 2^ such that F(G) \subseteq S_G for all G \in \Gamma. ...
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Quasi-perfect Equilibrium
Quasi-perfect equilibrium is a refinement of Nash Equilibrium for extensive form games due to Eric van Damme. Informally, a player playing by a strategy from a quasi-perfect equilibrium takes observed as well as potential future mistakes of his opponents into account but assumes that he himself will not make a mistake in the future, even if he observes that he has done so in the past. Quasi-perfect equilibrium is a further refinement of sequential equilibrium Sequential equilibrium is a refinement of Nash Equilibrium for extensive form games due to David M. Kreps and Robert Wilson. A sequential equilibrium specifies not only a strategy for each of the players but also a belief for each of the player .... It is itself refined by normal form proper equilibrium. Mertens' voting game It has been argued by Jean-François MertensJean-François Mertens. "Two examples of strategic equilibrium." ''Games and Economic Behavior'', 8:378--388, 1995. that quasi-perfect equilibrium is ...
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Solution Concept
In game theory, a solution concept is a formal rule for predicting how a game will be played. These predictions are called "solutions", and describe which strategies will be adopted by players and, therefore, the result of the game. The most commonly used solution concepts are equilibrium concepts, most famously Nash equilibrium. Many solution concepts, for many games, will result in more than one solution. This puts any one of the solutions in doubt, so a game theorist may apply a refinement to narrow down the solutions. Each successive solution concept presented in the following improves on its predecessor by eliminating implausible equilibria in richer games. Formal definition Let \Gamma be the class of all games and, for each game G \in \Gamma, let S_G be the set of strategy profiles of G. A ''solution concept'' is an element of the direct product \Pi_2^; ''i.e''., a function F: \Gamma \rightarrow \bigcup\nolimits_ 2^ such that F(G) \subseteq S_G for all G \in \Gamma. Ra ...
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