Prisoner's Dilemma
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Prisoner's Dilemma
The Prisoner's Dilemma is an example of a game analyzed in game theory. It is also a thought experiment that challenges two completely rational agents to a dilemma: cooperate with their partner for mutual reward, or betray their partner ("defect") for individual reward. This dilemma was originally framed by Merrill Flood and Melvin Dresher while working at RAND in 1950. Albert W. Tucker appropriated the game and formalized it by structuring the rewards in terms of prison sentences and named it "prisoner's dilemma". William Poundstone in his 1993 book ''Prisoner's Dilemma'' writes the following version:Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of speaking to or exchanging messages with the other. The police admit they don't have enough evidence to convict the pair on the principal charge. They plan to sentence both to two years in prison on a lesser charge. Simultaneously, the police offer each prisoner a ...
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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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Backward Induction
Backward induction is the process of reasoning backwards in time, from the end of a problem or situation, to determine a sequence of optimal actions. It proceeds by examining the last point at which a decision is to be made and then identifying what action would be most optimal at that moment. Using this information, one can then determine what to do at the second-to-last time of decision. This process continues backwards until one has determined the best action for every possible situation (i.e. for every possible information set) at every point in time. Backward induction was first used in 1875 by Arthur Cayley, who uncovered the method while trying to solve the infamous Secretary problem. In the mathematical optimization method of dynamic programming, backward induction is one of the main methods for solving the Bellman equation. In game theory, backward induction is a method used to compute subgame perfect equilibria in sequential games. The only difference is that optimizat ...
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Tit For Tat
Tit for tat is an English saying meaning "equivalent retaliation". It developed from "tip for tap", first recorded in 1558. It is also a highly effective strategy in game theory. An agent using this strategy will first cooperate, then subsequently replicate an opponent's previous action. If the opponent previously was cooperative, the agent is cooperative. If not, the agent is not. Game theory Tit-for-tat has been very successfully used as a strategy for the iterated prisoner's dilemma. The strategy was first introduced by Anatol Rapoport in Robert Axelrod's two tournaments, held around 1980. Notably, it was (on both occasions) both the simplest strategy and the most successful in direct competition. An agent using this strategy will first cooperate, then subsequently replicate an opponent's previous action. If the opponent previously was cooperative, the agent is cooperative. If not, the agent is not. This is similar to reciprocal altruism in biology. History The term develo ...
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Robert Aumann
Robert John Aumann (Hebrew name: , Yisrael Aumann; born June 8, 1930) is an Israeli-American mathematician, and a member of the United States National Academy of Sciences. He is a professor at the Center for the Study of Rationality in the Hebrew University of Jerusalem in Israel. He also holds a visiting position at Stony Brook University, and is one of the founding members of the Stony Brook Center for Game Theory. Aumann received the Nobel Memorial Prize in Economic Sciences in 2005 for his work on conflict and cooperation through game theory analysis. He shared the prize with Thomas Schelling. Early years Aumann was born in Frankfurt am Main, Germany, and fled to the United States with his family in 1938, two weeks before the Kristallnacht pogrom. He attended the Rabbi Jacob Joseph School, a yeshiva high school in New York City. Academic career Aumann graduated from the City College of New York in 1950 with a B.Sc. in mathematics. He received his M.Sc. in 1952, and his Ph.D. ...
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Cooperation
Cooperation (written as co-operation in British English) is the process of groups of organisms working or acting together for common, mutual, or some underlying benefit, as opposed to working in competition for selfish benefit. Many animal and plant species cooperate both with other members of their own species and with members of other species (symbiosis or mutualism). Among humans Humans cooperate for the same reasons as other animals: immediate benefit, genetic relatedness, and reciprocity, but also for particularly human reasons, such as honesty signaling (indirect reciprocity), cultural group selection, and for reasons having to do with cultural evolution. Language allows humans to cooperate on a very large scale. Certain studies have suggested that fairness affects human cooperation; individuals are willing to punish at their own cost (''altruistic punishment'') if they believe that they are being treated unfairly. Sanfey, et al. conducted an experiment where 19 ind ...
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Superrational
In economics and game theory, a participant is considered to have superrationality (or renormalized rationality) if they have perfect rationality (and thus maximize their utility) but assume that all other players are superrational too and that a superrational individual will always come up with the same strategy as any other superrational thinker when facing the same problem. Applying this definition, a superrational player playing against a superrational opponent in a prisoner's dilemma will cooperate while a rationally self-interested player would defect. This decision rule is not a mainstream model within the game theory and was suggested by Douglas Hofstadter in his article, series, and book ''Metamagical Themas'' – reprinted in: as an alternative type of rational decision making different from the widely accepted game-theoretic one. Superrationality is a form of Immanuel Kant's categorical imperative, and is closely related to the concept of Kantian equilibrium propos ...
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Mathematical Induction
Mathematical induction is a method for proving that a statement ''P''(''n'') is true for every natural number ''n'', that is, that the infinitely many cases ''P''(0), ''P''(1), ''P''(2), ''P''(3), ...  all hold. Informal metaphors help to explain this technique, such as falling dominoes or climbing a ladder: A proof by induction consists of two cases. The first, the base case, proves the statement for ''n'' = 0 without assuming any knowledge of other cases. The second case, the induction step, proves that ''if'' the statement holds for any given case ''n'' = ''k'', ''then'' it must also hold for the next case ''n'' = ''k'' + 1. These two steps establish that the statement holds for every natural number ''n''. The base case does not necessarily begin with ''n'' = 0, but often with ''n'' = 1, and possibly with any fixed natural number ''n'' = ''N'', establishing the truth of the statement for all natu ...
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Peace War Game
Peace war game is an iterated game originally played in academic groups and by computer simulation for years to study possible strategies of cooperation and aggression. As peace makers became richer over time it became clear that making war had greater costs than initially anticipated. The only strategy that acquired wealth more rapidly was a " Genghis Khan", a constant aggressor making war continually to gain resources. This led to the development of the "provokable nice guy" strategy, a peace-maker until attacked.N.R. Miller"Nice Strategies Finish First: A Review of ''The Evolution of Cooperation''" ''Politics and the Life Sciences'', Association for Politics and the Life Sciences, 1985. Multiple players continue to gain wealth cooperating with each other while bleeding the constant aggressor. The Hanseatic League for trade and mutual defense appears to have originated from just such concerns about seaborne raiders. The peace war game is a variation of the iterated prisoner ...
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Marginal Utility
In economics, utility is the satisfaction or benefit derived by consuming a product. The marginal utility of a Goods (economics), good or Service (economics), service describes how much pleasure or satisfaction is gained by consumers as a result of the increase or decrease in Consumption (economics), consumption by one unit. There are three types of marginal utility. They are positive, negative, or zero marginal utility. For instance, you like eating pizza, the second piece of pizza brings you more satisfaction than only eating one piece of pizza. It means your marginal utility from purchasing pizza is positive. However, after eating the second piece you feel full, and you would not feel any better from eating the third piece. This means your marginal utility from eating pizza is zero. Moreover, you might feel sick if you eat more than three pieces of pizza. At this time, your marginal utility is negative. In other words, a negative marginal utility indicates that every unit of good ...
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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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Pareto Efficient
Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: * Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose. * A situation is called Pareto-dominated if there exists a possible Pareto improvement. * A situation is called Pareto-optimal or Pareto-efficient if no change could lead to improved satisfaction for some agent without some other agent losing or, equivalently, if there is no scope for further Pareto improvement. The Pareto front (also called Pareto frontier or Pareto set) is the set of all Pareto-efficient situations. Pareto originally used the word "optimal" for ...
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Nash Equilibrium
In game theory, the Nash equilibrium, named after the mathematician John Nash, is the most common way to define the solution of a non-cooperative game involving two or more players. In a Nash equilibrium, each player is assumed to know the equilibrium strategies of the other players, and no one has anything to gain by changing only one's own strategy. The principle of Nash equilibrium dates back to the time of Cournot, who in 1838 applied it to competing firms choosing outputs. If each player has chosen a strategy an action plan based on what has happened so far in the game and no one can increase one's own expected payoff by changing one's strategy while the other players keep their's unchanged, then the current set of strategy choices constitutes a Nash equilibrium. If two players Alice and Bob choose strategies A and B, (A, B) is a Nash equilibrium if Alice has no other strategy available that does better than A at maximizing her payoff in response to Bob choosing B, and Bob ...
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