In game theory, a sequential game is a game where one player chooses their action before the others choose theirs.Importantly, the later players must have some information of the first's choice, otherwise the difference in time would have no strategic effect. Sequential games hence are governed by the time axis, and represented in the form of decision trees.
Sequential games with perfect information can be analysed mathematically using combinatorial game theory.
Decision trees are the extensive form of dynamic games that provide information on the possible ways that a given game can be played. They show the sequence in which players act and the number of times that they can each make a decision. Decision trees also provide information on what each player knows or does not know at the point in time they decide on an action to take. Payoffs of each player are also given at the decision nodes of the tree. Extensive form representations were introduced by Neumann and further developed by Kuhn in the earliest years of game theory between 1910–1930.
Repeated games are an example of sequential games. Players play a stage game and the result of this game will determine how the game continues. At every new stage, both players will have complete information on how the previous stages had played out. A discount rate between the values of 0 and 1 is usually taken into account when considering the payoff of each player in these games. Repeated games can illustrate the psychological aspect of these games, including trust and revenge, as each player makes a decision at every stage game based on how the game has been played out so far.
Unlike sequential games, simultaneous games do not have a time axis as players choose their moves without being sure of the other's, and are usually represented in the form of payoff matrices. Extensive form representations are usually used for sequential games, since they explicitly illustrate the sequential aspects of a game. Combinatorial games are usually sequential games.
Games such as chess, infinite chess, backgammon, tic-tac-toe and Go are examples of sequential games. The size of the decision trees can vary according to game complexity, ranging from the small game tree of tic-tac-toe, to an immensely complex game tree of chess so large that even computers cannot map it completely.
In sequential games with perfect information, a subgame perfect equilibrium can be found by backward induction.
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 of the other participants. Today, game theory applies to a wide range of behavioral relations, and is now an umbrella term for the science of logical decision making in humans, animals, and computers.
In game theory, the Nash equilibrium, named after the mathematician John Forbes Nash Jr., is a proposed solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy.
Combinatorial game theory (CGT) is a branch of mathematics and theoretical computer science that typically studies sequential games with perfect information. Study has been largely confined to two-player games that have a position in which the players take turns changing in defined ways or moves to achieve a defined winning condition. CGT has not traditionally studied games of chance or those that use imperfect or incomplete information, favoring games that offer perfect information in which the state of the game and the set of available moves is always known by both players. However, as mathematical techniques advance, the types of game that can be mathematically analyzed expands, thus the boundaries of the field are ever changing. Scholars will generally define what they mean by a "game" at the beginning of a paper, and these definitions often vary as they are specific to the game being analyzed and are not meant to represent the entire scope of the field.
In economics, perfect information is a feature of perfect competition. With perfect information in a market, all consumers and producers have perfect and instantaneous knowledge of all market prices, their own utility, and own cost functions.
In game theory, the centipede game, first introduced by Robert Rosenthal in 1981, is an extensive form game in which two players take turns choosing either to take a slightly larger share of an increasing pot, or to pass the pot to the other player. The payoffs are arranged so that if one passes the pot to one's opponent and the opponent takes the pot on the next round, one receives slightly less than if one had taken the pot on this round. Although the traditional centipede game had a limit of 100 rounds, any game with this structure but a different number of rounds is called a centipede game.
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.
An extensive-form game is a specification of a game in game theory, allowing for the explicit representation of a number of key aspects, like the sequencing of players' possible moves, their choices at every decision point, the 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".
In game theory, an information set is a set that, for a particular player, establishes all the possible moves that could have taken place in the game so far, given what that player has observed. If the game has perfect information, every information set contains only one member, namely the point actually reached at that stage of the game. Otherwise, it is the case that some players cannot be sure exactly what has taken place so far in the game and what their position is.
In game theory, a Perfect Bayesian Equilibrium (PBE) is an equilibrium concept relevant for dynamic games with incomplete information. It is a refinement of Bayesian Nash equilibrium (BNE). A PBE has two components - strategies and beliefs:
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 first considering the last time a decision might be made and choosing what to do in any situation at that time. 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 at every point in time. It was first used by Zermelo in 1913, to prove that chess has pure optimal strategies.
In game theory, trembling hand perfect equilibrium is a refinement of Nash equilibrium due to Reinhard Selten. A trembling hand perfect equilibrium is an equilibrium that takes the possibility of off-the-equilibrium play into account by assuming that the players, through a "slip of the hand" or tremble, may choose unintended strategies, albeit with negligible probability.
In game theory, folk theorems are a class of theorems describing an abundance of Nash equilibrium payoff profiles in repeated games. The original Folk Theorem concerned the payoffs of all the Nash equilibria of an infinitely repeated game. This result was called the Folk Theorem because it was widely known among game theorists in the 1950s, even though no one had published it. Friedman's (1971) Theorem concerns the payoffs of certain subgame-perfect Nash equilibria (SPE) of an infinitely repeated game, and so strengthens the original Folk Theorem by using a stronger equilibrium concept: subgame-perfect Nash equilibria rather than Nash equilibria.
In game theory, a repeated game is an extensive form game that consists of a number of repetitions of some base game. The stage game is usually one of the well-studied 2-person games. Repeated games capture the idea that a player will have to take into account the impact of his or her current action on the future actions of other players; this impact is sometimes called his or her reputation. Single stage game or single shot game are names for non-repeated games.
In game theory, a Manipulated Nash equilibrium or MAPNASH is a refinement of subgame perfect equilibrium used in dynamic games of imperfect information. Informally, a strategy set is a MAPNASH of a game if it would be a subgame perfect equilibrium of the game if the game had perfect information. MAPNASH were first suggested by Amershi, Sadanand, and Sadanand (1988) and has been discussed in several papers since. It is a solution concept based on how players think about other players' thought processes.
In game theory, a subgame perfect equilibrium is a refinement of a Nash equilibrium used in dynamic games. A strategy profile is a subgame perfect equilibrium if it represents a Nash equilibrium of every subgame of the original game. Informally, this means that if the players played any smaller game that consisted of only one part of the larger game, their behavior would represent a Nash equilibrium of that smaller game. Every finite extensive game with perfect recall has a subgame perfect equilibrium.
In game theory, a simultaneous game or static game is a game where each player chooses their action without knowledge of the actions chosen by other players. Simultaneous games contrast with sequential games, which are played by the players taking turns. In other words, both players normally act at the same time in a simultaneous game. Even if the players do not act at the same time, both players are uninformed of each other's move while making their decisions. Normal form representations are usually used for simultaneous games. Given a continuous game, players will have different information sets if the game is simultaneous than if it is sequential because they have less information to act on at each step in the game. For example, in a two player continuous game that is sequential, the second player can act in response to the action taken by the first player. However, this is not possible in a simultaneous game where both players act at the same time.
A Markov perfect equilibrium is an equilibrium concept in game theory. It is the refinement of the concept of subgame perfect equilibrium to extensive form games for which a pay-off relevant state space can be readily identified. The term appeared in publications starting about 1988 in the work of economists Jean Tirole and Eric Maskin. It has since been used, among else, in the analysis of industrial organization, macroeconomics and political economy.
Jean-François Mertens was a Belgian game theorist and mathematical economist.
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.
The one-shot deviation principle is the principle of optimality of dynamic programming applied to game theory. It says that a strategy profile of a finite extensive-form game is a subgame perfect equilibrium (SPE) if and only if there exist no profitable one-shot deviations for each subgame and every player. In simpler terms, if no player can increase their payoffs by deviating a single decision, or period, from their original strategy, then the strategy that they have chosen is a SPE. As a result, no player can profit from deviating from the strategy for one period and then reverting to the strategy.