Hi folks, welcome back.

So this is Matt
Jackson, and we are talking now about
defining games and we work to some basic
definitions of the key ingredients in, in
games.
So let's take a look at some of those. So
obviously one of the most obvious ones is
the players in a game. So who is making
the decisions, are they people?
Are we talking about governments
negotiating over trade agreements?
Are we talking about companies, choosing
astrologies for developing the products?
do we, do we want to get down to the, the
point of modeling people within a firm,
as opposed to the company as a whole? so
this whole, there's a whole series of
questions about how we're going to choose
the players, but they're, they're going
to be the central decision makers in what
we're doing.
next we have to decided how we're going
to model the actions.
So what can players, what actions can
players actually take? So, when we're,
later on in the course we'll be looking
at auctions, they'll have bids, so they
can enter a number of bids.
when we're talking about bargaining, it
might be deciding whether or not to
strike.
when we're thinking about investing, it
could be that an investor is deciding how
much of a stock to buy or sell, when to
buy or sell it.
how they should react to other people in
the market, how they should be
conditioning their decisions on, on
prices.
when we think about voters, how do they
vote.
So, there's going to be a whole series of
actions, and we'll want to be careful in
making sure that we have the essential
actions modeled.
finally, payoffs.
So, what's motivating the players? Do
they care simply about some sort of
profit.
Do they care about other players? So how
are they receiving utility as a function
of what, what the actions lead to in the
context of the game? So there's basically
2 standard representations of games.
one is, is what's known as the normal
form, and that's what we'll be starting
with in the course,
and what it does is it, it's a a very
simple and, and stark representation of a
game.
So it lists what payoffs players get as a
function of their actions.
normally, it's, it's thought of as, as,
as if players were moving simultaneously,
but strategies, and we'll talk about this
in more detail, can, can encode many
things.
So, the other alternative representation
is what's known as the Extensive Form,
and that includes more explicit timing in
the game.
So who moves at what, at what point in
time.
So that's going to be represented often
as a tree.
So, for instance in chess one player
moves first.
the white player generally moves first,
and the, the black player can see the,
the move by the other player, react to
that.
And so far.
So that's going to be better represented
as a tree than than in normal form.
So keeps track of also what players know
when they move.
So in poker, somebody moves first. They
may give a bet, but the other player only
sees the bet and not necessarily the card
that other player sees.
So in some cases we'll have sequential
games, where players will have different
information at different place and time.
We'll want to talk about modeling that
explicitly too.
So we're going to start out with the
normal form, and then we'll move later in
the course to the extensive form, and
we'll talk about the relationship between
these two in more details.
OK, so normal form games.
What are the key ingredients? again,
players.
So we're going to have generally we're
going to think of finite sets of players.
So 1 through n, little n will represent
the set of players.
Generally, we'll index these things by an
i so we'll use a little i to represent
the, a generic player.
The action set for, for players.
we'll represent by a sub i. Okay, so
we'll let that represent the actions of
player i, and then we'll talk about
profiles of actions which will just be a
list of what every player is doing.
So for instance are they the, the,
deciding to, cooperate or not to
cooperate with other players, for
instance.
In the, in the Prisoner's Dilemma, that
we'll take about.
the utility function is then a payoff
function, which indicates as a function
of all the actions that are played What's
the payoff for the different players?
So for each player i, we end up with a
function which tells us how they evaluate
outcomes of the game.
And again, how they evaluate these things
could could encapsulate many things,
and it's going to be very important to
make sure that we were getting the right
representation of what really motivates
people.
Okay.
So, often, when we, when we represent
normal form games, a very simple ways of
doing that is just matrix representation.
So, let's just look at, at, the, the most
standard representation of very simple
games.
writing at two player game as a matrix.
So we'll have one player 1, will be the
role player.
Player 2 will have, be a column player.
So they're going to choose actions
that'll be represented in a column of the
matrix.
And the cells, inside the cells will then
represent the payoffs.
So for instance, the TCP Backoff game
that was talked about in the earlier
video, can be written as a matrix as
follows.
So, the roleplayer, player 1 can be
written as either C or D.
So this is player 1's choice, generally
known as the row player.
This is player 2's, the column player,
and they represent the, the choices that
they have, and in inside the cells are
the payoffs to the different players.
So if player 1 cooperates and player 2
cooperates,
then these are the payoffs to the 2
players.
The first payoff, player 1, second
playoff, player 2. So this is going to
the column player, this one is going to
the row player.
Okay? Then we end up, you know, for
instance, if the row player chooses D,
and the column player chooses C, then we
end up with a payoff here of 0 to the row
player, and minus 4 to the column player.
So the matrix is a very simple way of
representing all of the, basic elements
of the normal form game visually, so that
we can actually keep track of exactly
what the strategic interaction is, and,
and what players would like to do as a
function of the game Okay.
let's talk about another game that we
won't be able to write down in such a
simple form.
so let's think of a large collective
action, game. So, for instance, whether
or not a population wants to revolt
against its government So here, we have
many more players.
So let's imagine that we have a
population of 10 million players.
So we're not, obviously not going to be
able to write that down as a, as a matrix
on our screen, so we can do that more
abstractly.
But we'll have 10 million players,
whether they, whether their actions here,
let's keep it very simple.
So they have a choice here of either
revolting or not.
So the action set is binary, two choices.
then the payoffs are going to be critical
thing in this game.
what happens? Well, let's say that in
order for revolt to be successful, you
need at least 2 million people to
participate.
So in this particular stylized example,
what do we end up with then? We, we can
represent the successful revolt as the
player getting a path of 1 so "Ui" of the
action profile "A" is equal to 1.
If the number of people here, the number
of, of players, j, such that they picked
to revolt, the number of this is at least
2 million.
So, if we end up with at least 2 million
people, revolting, then player i, gets 1,
and note here that this is true
regardless of whether I as one of the
revolt's participants, so this is a game
where you care about the end outcome, not
necessarily getting utility out of the
participation.We could change this and
have people get enjoyment out of the
participation or have cost of the
participation directly as well.
Okay, so what's, what happens if if
things fail.
here, if we end up with less 2,000,000,
then it depends on whether you were a
participant in the revolt or not.
So, if you, if player i was a participant
in the revolt and it fails,
then they get a payoff of negative 1.
So, this could be in a situation where
they're punished by the government, or
face some other kinds of sanctions,
and they get a path of 0 if they were
both not successful and they didn't
participate so they weren't one of the
people that was actually revolting.
Now obviously this is very stylized, but
what it does capture is that players have
to strategically analyze and predict what
other players are going to do and their
pay-offs depend not only on what they're
doing, right so here we have a situation
where player i's payoff depends on
whether they revolt or not but it also
depends on what other players are doing
and it can depend in fairly complicated
ways on what all the players in the game
are doing.
Okay, so just in summary, in defining
games we have two different forms, the
normal form and the extensive form.
For now, we're starting with the, normal
form critical ingredients, players,
actions and pay-offs.
Later, when we get to the extensive form,
that's going to bring in timing,
information, and so forth.
So, extra things, that will account for
more detailed, representations of, of
the, strategic interaction by players.