SUMMARY OF BUAD 837

Modudule 1: Quantitative Methods for Decision Making 1

Study 1: Decision Making Under Conditions of Uncertainty

A decision under uncertainty is when there are many unknowns and no possibility of knowing what
could occur in the future to alter the outcome of a decision. Different Decision Making Criteria are:
Maximim criteria, Maximax criterion, Regret criterion, Hurwiez criterion, Laplace criterion.

 Maximin Criterion: This criterion, also known as the criterion of pessimism, is used when the
decision-maker is pessimistic about future. Maximin implies the maximisation of minimum
payoff.
 Maximax Criterion: This criterion, also known as the criterion of optimism, is used when the
decision-maker is optimistic about future. Maximax implies the maximisation of maximum
payoff.
 Regret Criterion: This criterion focuses upon the regret that the decision-maker might have
from selecting a particular course of action.
 Hurwicz Criterion: The maximax and the maximin criteria, discussed above, assumes that the
decision-maker is either optimistic or pessimistic.
 Laplace Criterion: In the absence of any knowledge about the probabilities of occurrence of
various states of nature, one possible way out is to assume that all of them are equally likely to
occur.
ITQ 1: Discuss decision making under uncertainty?
ITA 1: The problem of decision making under uncertainty is to choose an action for decision among many
different available actions which gives possibly maximum expected profit or maximum expected revenue
or minimum expected losses or minimum expected costs as the case may be, under uncertain situations.
Decision m\Making under Risk
Risk implies a degree of uncertainty and an inability to fully control the outcomes or consequences of
such an action. Risk or the elimination of risk is an effort that managers employ.
The process is as follows:

1. The problem is defined, and all feasible alternatives are considered. The possible outcomes for each
alternative are evaluated.
2. Outcomes are discussed based on their monetary payoffs or net gain in reference to assets or time.
3. Various uncertainties are quantified in terms of probabilities.
4. The quality of the optimal strategy depends upon the quality of the judgments. The decision-maker
should identify and examine the sensitivity of the optimal strategy with respect to the crucial factors.
In decision-making under risk the process is as follow. The problem is defined and all feasible
alternatives are considered. Outcomes are discussed based on their monetary payoffs or net gain in
reference to assets or time. Various uncertainties are quantified in terms of probabilities
The quality of the optimal strategy depends upon the quality of the judgments
The decision making under risk process is as follows:
 Use the information you have to assign your beliefs
 Each action has a payoff associated with each of the states of nature
 We compute the expected payoff
 We accept the principle that we should minimize (or maximize) the expected payoff,
 Execute the action which minimize
ITQ 2: Differentiate between decision making under uncertainty and risk?
ITA 2: In case of decision-making under uncertainty the probabilities of occurrence of various states of
nature are not known. When these probabilities are known or can be estimated, the choice of an optimal
action, based on these probabilities, is termed as decision making under risk.

Study 2: The Set Theory

A set is a collection of objects, or element. Typically, the type of all the elements in a set is the same.
(For example, all the elements in a set could be integers.) Sets can be infinite of course. For example V =
{a, e, i, o, u} is the set of vowels in English. B = {0, 1} the set of symbols in the binary number system. O =
{2, 4, 6,} = {x: where x is an even positive integer}.

 We have two usual methods of denoting the elements in a set:

1) Explicitly list the elements inside of a set of curly braces ({}), as follows: {1,
2, 3, 4}
2) Give a description of the elements in a set inside of a set of curly braces as
follows: {2x | x N }.
| - translates to “such that”
- “is an element of”
- “is a proper subset of”
- “is a subset of”

ITQ 1: List the two common methods of denoting the elements in a set
ITA: 1: Explicitly list the elements inside of a set of curly braces ({}), as follows: {1, 2, 3, 4}.
2) Give a description of the elements in a set inside of a set of curly braces as follows: {2x | x N}.

 Set Operators
The first two operators are binary operators, union and intersection. In each of these examples, let A
and B be sets. The union of two sets contains all elements in either set and the
intersection of two sets contains all elements in BOTH sets.

 Equality of Sets
There are three essentially different ways that we can show two sets to be equal. The first two are going
to be analogous to methods used in logic.
1) Use the laws of set theory.
2) Use the table method.

 Table Method
Another way to think of showing set equality is to look at a Venn Diagram and consider each possible
position an arbitrary element can be located.

ITQ 3: What is the difference between union and intersection of two set
ITA 3: The union of two sets contains all elements in either set and the intersection of two sets contains
all elements in BOTH sets.

Study 3: Probability Theory

 Classical probability applies to situations where you know all the possible outcomes, such as
when throwing dice or flipping a coin.
 Empirical probability applies when we have to estimate a frequency based on actual
observations.
 Subjective probability applies in situations that cannot really be repeated
 P (A) = 1 means the event occurs with certainty; P(A) = 0 means that it will certainly not occur.
P (A) is always in the interval [0,
 The complement of event A is denoted ~A (or in the book A’). This is the probability that A will
not occur. P(~A) = 1 – P(A), and P(A) + P(~A) = 1.
 Intersections and Unions of Events
 The intersection of two events is when two events both happen. The union of two events is
when one or the other happens, or both
 Probability of the union can be found using this formula: P (A U B) = P(A) + P(B) – P(A ∩ B)
 If the two events are mutually exclusive, meaning they cannot happen at the same time, then
the formula simplifies to P (A U B) = P(A) + P(B).

ITQ 1: The sum of the chances of occurrences of events in a sample space is…….
ITA 1: The probability of all events put together must add up to 1, so long as we don’t double-count by
including events that overlap.

 Conditional Probabilities A conditional probability tells you the probability of some event given
that you already know another event has occurred.

The formula for conditional probability is:

 Multiplication Rule
Events are called independent if the occurrence of one does not affect the probability of the other. That
is, P (A|B) = P (A).
Bayes Rule

 Bayes’ Rule is a formula for finding a conditional probability P(A|B) given information about
P(B|A).

 Medical Testing: Probably the most important applications of Bayes’ Rule involve medical
testing, such as for disease or drug use.
 The Monty Hall Problem: Monty Hall, the host presents you with three doors. Behind one
there’s a bag of gold; behind the other two there are goats.
ITQ 2: State the formula for conditional probability
ITA 2: The formula for conditional probability is: P(A|B) = P(A B) / P(B)

Study 4: Probability Distribution

A probability distribution is a specification of all different possible values of a random variable along
with a measure of the frequency for each of those values. There are two kinds of random variables and
thus two kinds of probability distributions: discrete and continuous. A discrete variable that can only
take a countable number of different values: Countable is not the same as finite.

ITQ 1: What do you understand by probability distribution?

ITA 1: A probability distribution is a specification of all different possible values of a
random variable along with a measure of the frequency for each of those values.

For discrete probability distributions, the value of the function P(x) can be interpreted as the probability
of the value x. But for continuous probability distributions, we cannot assign a probability to each
possible value because there are an infinite number of possible values. the normal distribution. The
normal distribution has a pdf that looks like this:

The standard normal distribution is the normal distribution with mean of zero and standard deviation of
1. If you plugged those into the pdf above, you’d get:

We changed x to z because, for historical reasons, we happen to call the standard normal variable z
instead of x.)

If you have a variable x that is normally distributed with mean μ and standard deviation σ, you can
convert any value of that variable into an equivalent value of a standard normal variable using the
following:

This is called a z-score, and it can be interpreted as the number of standards

ITQ 2: What is the difference between discrete and continuous variable?

ITA 2: A discrete variable that can only take a countable number of different values: Countable is not the
same as finite. A continuous variable is one that is measured on a continuous (unbroken) number scale,
and therefore can take on an uncountable and infinite number of possible values.

Module 2: Quantitative Methods for Decision Making 2

Study 1: Decision Theory

Decision theory (or the theory of choice) is the study of the reasoning underlying an agent's choices.

1 Decision Theory can be broken into three branches:

 Normative decision theory, which gives advice on how to make the best decisions, given a set of
uncertain beliefs and a set of values.
 Descriptive decision theory, which analyzes how existing, possibly irrational agents actually
make decisions.
 Prescriptive decision theory, which tries to guide or give procedures on how or what we should
do in order to make best decisions in line with the normative theory.
2 Decision theory is concerned with the choices of individual agents whereas game theory is
concerned with interactions of agents whose decisions affect each other.
3 Political and other social scientists, philosophers.
4 Computer scientists.

ITQ 1: Decision theory can be broken into three branches, briefly explain them.
ITA 1: Decision theory can be broken into three branches: normative decision theory, which gives advice
on how to make the best decisions, given a set of uncertain beliefs and a set of values; and descriptive
decision theory, which analyzes how existing, possibly irrational agents actually make decisions; and
prescriptive decision theory, which tries to guide or give procedures on how or what we should do in
order to make best decisions in line with the normative theory.

Choice under uncertainty

 Inter-temporal choice Inter-temporal choice is concerned with the kind of choice where
different actions lead to outcomes that are realized at different points in time
 Interaction of decision makers Some decisions are difficult because of the need to take into
account how other people in the situation will respond to the decision that is taken. The analysis
of such social decisions is more often treated under the label of game theory
 Complex Decisions are decisions that are difficult simply because of the Individuals making
decisions may be limited in resources or are boundedly rational (have finite time or
intelligence); One example is the model of economic growth and resource usage developed by
the Club of Rome to help politicians make real-life decisions in complex situations..
 Heuristics The heuristic approach to decision-making makes decisions based on routine thinking,
which, while quicker than step-by-step processing, opens the risk of introducing inaccuracies,
mistakes and fallacies, which may be easily disproved in a step-by-step process of thinking.

Alternatives
A highly controversial issue is whether one can replace the use of probability in decision theory by other
alternatives.
Probability theory
Advocates for the use of probability theory point to:

 the work of Richard Threlkeld Cox for justification of the probability axioms,
 the Dutch book paradoxes of Bruno de Finetti as illustrative of the theoretical difficulties that
can arise from departures from the probability axioms, and
 the complete class theorems, which show that all admissible decision rules are equivalent to
the Bayesian decision rule for some utility function
The proponents of fuzzy logic, possibility theory, quantum cognition, Dempster– Shafer theory, and info-
gap decision theory maintain that probability is only one of many alternatives and point to many
examples where non-standard alternatives have been implemented with apparent success

Ludic fallacy A general criticism of decision theory based on a fixed universe of possibilities is that it
considers the "known unknowns", not the "unknown unknowns

ITQ 2: What do you understand by Inter-temporal choice?

ITA 2: Inter-temporal choice is concerned with the kind of choice where different actions lead
to outcomes that are realized at different points in time.

Study 2: Concept of Queuing Theory

Waiting time has become more important because of the increased emphasis on quality, especially in
service-related operations. Companies focus on reducing waiting time as a component of quality
improvement. Companies are able to reduce waiting time and provide faster service by increasing their
service capacity, which usually means adding more servers--that is, more tellers, more mechanics, or
more checkout clerks.

 Elements of Waiting Line Analysis

Waiting lines form because people or things arrive at the servicing function, or server, faster than they
can be served. Most businesses and organizations have sufficient serving capacity available to handle its
customers in the long run. Waiting lines result because customers do not arrive at a constant, evenly
paced rate, nor are they all served in an equal amount of time.
Decisions about waiting lines and the management of waiting lines are based on these averages for
customer arrivals and service times. They are used in queuing formulas to compute operating
characteristics such as the average number of customers waiting in line and the average time a
customer must wait in line.

 Elements of a Waiting Line

The basic elements of a waiting line, or queue, are arrivals, servers, and the waiting line.

 The Calling Population

This is the source of the customers to the queuing system, and it can be either infinite or finite.
An infinite calling population assumes such a large number of potential customers that it is
always possible for one more customer to arrive to be served.

ITQ 1: Why queuing line?

ITA 1: Waiting lines form because people or things arrive at the servicing function, or server, faster than
they can be served.

The Arrival Rate

The arrival rate is the rate at which customers arrive at the service facility during a specified period of
time. This rate can be estimated from empirical data derived from studying the system or a similar
system, or it can be an average of these empirical data.
 Service Times The queuing theory arrivals are described in terms of a rate and service in terms
of time.
  Arrival Rate Less Than Service Rate It is logical to assume that the rate at which services are
completed must exceed the arrival rate of customers.

 Queue Discipline and Length

Queue Discipline and Length The queue discipline is the order in which waiting customers are served.
The most common type of queue discipline is first come, first served--the first person or item in line
waiting is served first
Queues can be of an infinite or finite size or length. An infinite queue can be of any size with no upper
limit and is the most common queue structure. A finite queue is limited in size. An example is the
driveway at a bank teller window that can accommodate only a limited number of cars.

 Basic Waiting Line Structures

Basic Waiting Line Structures Waiting line processes are generally categorized into four basic structures,
according to the nature of the service facilities: single-channel, single-phase; single-channel, multiple-
phase; multiple-channel, single-phase; and multiple channel, multiple-phase processes.

 Operating Characteristics
Operating characteristics that describe the performance of the queuing system and that management
uses to evaluate the system and make decisions

ITQ 2: What do you know about arrival rate in queuing line analysis?
ITA 2: The arrival rate is the rate at which customers arrive at the service facility during a specified
period of time. This rate can be estimated from empirical data derived from studying the system or a
similar system, or it can be an average of these empirical data.

Study 3: Transportation Model

There is a type of linear programming problem that may be solved using a simplified version of the
simplex technique called transportation method.

The Transportation Problem There is a type of linear programming problem that may be solved using a
simplified version of the simplex technique called transportation method

the two common objectives of such problems are either (1) minimize the cost of shipping m units to n
destinations or (2) maximize the profit of shipping m units to n destinations.

There are three general steps in solving transportation problems.

 The Transportation Matrix: In such situations, for the transportation method to work, a dummy
warehouse or factory must be added. Procedurally, this involves inserting an extra row (for an
additional factory) or an extra column (for an ad warehouse). The amount of supply or demand
required by the ”dummy” equals the difference between the row and column totals.
 Initial Feasible Solution: Initial allocation entails assigning numbers to cells to satisfy supply and
demand constraints. Next we will discuss several methods for doing this: the Northwest- Corner
method, Least-Cost method, and Vogel's approximation method (VAM).
 Develop Optimal Solution: To develop an optimal solution in a transportation problem involves
evaluating each unused cell to determine whether a shift into it is advantageous from a total-cost
 stand point. If it is, the shift is made, and the process is repeated. When all cells have been
evaluated and appropriate shifts made, the problem is solved. One approach to making this
evaluation is the Stepping stone method.

 Alternate Optimal Solutions: When the evaluation of any empty cell yields the same cost as the
existing allocation, an alternate optimal solution exists.

ITQ 1: Why is transportation model important?

ITA 1: To develop an optimal solution in a transportation problem, it involves evaluating each unused cell
to determine whether a shift into it is advantageous from a total-cost stand point. If it is, the shift is
made, and the process is repeated. When all cells have been evaluated and appropriate shifts made, the
problem is solved.

 Degeneracy exists in a transportation problem when the number of filled cells is less than the
number of rows plus the number of columns minus one (m + n - 1).

 The Transshipment Problem

The transshipment problem is similar to the transportation problem except that in the transshipment
problem it is possible to both ship into and out of the same node (point).
The Assignment Problem Another transportation problem is the assignment problem. You can use this
problem to assign tasks to people or jobs to machines

ITQ 2: Explain how to develop an optimal solution problem?

ITA 2: The transportation model can be used to determine how to allocate the supplies available from
the various factories to the warehouses that stock or demand those goods, in such a way that total
shipping cost is minimized.

Study 4: Linear Programming

 Explanation of Simplex Method The Simplex method is an approach to solving linear

programming models by hand using slack variables, tableaus, and pivot variables as a means to
finding the optimal solution of an optimization problem

To solve a linear programming model using the Simplex method the following steps are necessary:
1. Standard form: Standard form is the baseline format for all linear programs before solving for
the optimal solution and has three requirements: (1) must be a maximization problem, (2) all
linear constraints must be in a less-than-or-equal-to inequality,
(3) all variables are non-negative.
2. Determine Slack Variables: Slack variables are additional variables that are introduced into the
linear constraints of a linear program to transform them from inequality constraints to equality
constraints.
3. Setting up the Tableau: The tableau consists of the coefficient corresponding to the linear
constraint variables and the coefficients of the objective function. In the tableau below, the
bolded top row of the tableau states what each column represents.
4. Check Optimality: The optimal solutions of a maximization linear programming model are the
 values assigned to the variables in the objective function to give the largest zeta value. The
optimal solution would exist on the corner points of the graph of the entire model.
5. Identify Pivot Variable: The pivot variable is used in row operations to identify which variable
will become the unit value and is a key factor in the conversion of the unit value. The pivot
variable can be identified by looking at the bottom row of the tableau and the indicator.
6. Create the New Tableau: The new tableau will be used to identify a new possible optimal
solution.
7. Check Optimality: the optimal solution of maximization linear programming model are the
values assigned to the variables in the objective function to give the largest zeta value.
8. Identify New Pivot Variable: If the solution has been identified as not optimal, a new pivot
variable will need to be determined.
9. Create New Tableau: After the new pivot variable has been identified, a new tableau will need
to be created.
10. Check Optimality: Using the new tableau, check for optimality.
11. Identify Optimal Values: Once the tableau is proven optimal the optimal values can be
identified. Thesecan be found by distinguishing the basic and non-basic variables.

ITQ 2: Discuss the Simplex method in linear programming?

ITA 2: Simplex method is an approach to solving linear programming models by hand using slack
variables, tableaus, and pivot variables as a means to finding the optimal solution of an optimization
problem. A linear program is a method of achieving the best outcome given a maximum or minimum
equation with linear constraints.

MODULE 3: Research Methods and Games

Study 1: Statistical Inference and Hypothesis Testing

 Inferential statistic is used to test some hypothesis and are used to make generalizations from a
sample to a population.
 Hypothesis testing is a statistical method that is used in making statistical decisions through
experimental data. This is basically an assumption that we make about the population
parameter.
Probability and Sampling Means
The difference between the mean of a sample and the population mean is called sampling error.
One of the main goals of statistics is to determine the probability that our sample is representative of
the population and a large sample is more likely to be representative of the population than is a small
sample.
Standard Error The standard error or standard error of the mean, of multiple samples is the standard
deviation of the sample means, and thus gives a measure of their spread.

Steps in calculating the standard error of the mean

Step 1. Determine the population mean or average.

Step 2. Calculate the standard deviation of the population.

Step 3. Calculate the Standard Error of the Mean. The Standard Error of the Mean is the likelihood range
of values of the Mean of the population
. Hypothesis and Hypothesis Tests

There are mainly two types of hypotheses

1). Null hypothesis: Is a statistical hypothesis testing that assumes that the observation is due to a
chance factor.

2). Alternative hypothesis: Contrary to the null hypothesis, alternative hypothesis shows that
observations are the result of a real effect

ITQ 1: Describe inferential statistics and hypothesis testing?

ITA 1: Inferential statistics are used to make generalizations from a sample to a population.
Hypothesis testing is a statistical method that is used in making statistical decisions through
experimental data.
Types of errors in hypothesis testing
 Type I error: In hypothesis testing, there are two types of errors. The first is type I error and the
second is type II error. In Hypothesis testing, type I error occurs when we are rejecting the null
hypothesis, but that hypothesis was true. In hypothesis testing, type I error is denoted by alpha.
In Hypothesis testing, the normal curve that shows the critical region is called the alpha region.
 Type II errors: In hypothesis testing, type II errors occur when we accept the null hypothesis but
it is false. In hypothesis testing, type II errors are denoted by beta. In Hypothesis testing, the
normal curve that shows the acceptance region is called the beta region.

Estimating the probability of encountering a type II error (denoted beta) is more involved than
estimating the probability of a type I error.

F-Test: The F-test is designed to test if two population variances are equal. It does this by comparing the
ratio of two variances

T-test other words, it is a class of distributions. The degrees of freedom for this t statistics comes from
the sample standard deviation s in the denominator of equation below

The larger the degrees of freedom, the closer the t-density is to the normal density. Large value of t
indicates a real difference in the two distributions. The critical value depends on:

1. The sizes of the two samples.

2. The level of significance chosen. Usually P = 0.05
3. Directional null hypothesis (1-tailed test) vs. Non directional null hypothesis (2-tailed test).
Assumptions in One sample t-test:
1. Dependent variables should be normally distributed. 2. Samples drawn from the population
should be random. 3. The samples should be independent.
Procedure for One Sample T-Test:
1. Set up the hypothesis for one sample t-test: a. Null hypothesis: In one sample t-test, null
hypothesis assumes that there are no significance differences between the population
mean and the sample mean. b. Alternative hypothesis: In one sample t-test, the alternative
hypothesis assumes that there is a significant difference between the population mean and
 the sample mean. 2. Calculate the standard deviation for one sample t-test by using this
formula:

4. Hypothesis testing: In hypothesis testing for the one sample t-test, statistical decisions are
made to decide whether or not the population mean and the same mean are different.
One-tailed test: In hypothesis testing, when the given statistical hypothesis is one value like H0:
μ1 = μ2, it is called the one-tailed test
Two-tailed test: In hypothesis testing, when the given statistics hypothesis assumes a less than
or greater than value, it is called the two-tailed test

ITQ 2: Differentiate between null and alternate hypothesis?

ITA 2: Null hypothesis: Is a statistical hypothesis testing that assumes that the observation is
due to a chance factor. Alternative hypothesis shows that observations are the result of a
real effect.

STUDY 2: Time Series/Trend Analysis

Time series data refers to observation of a particular variable over time
Any time series can contain some or all of the following components:
1. Trend (T) 2. Cyclical (C) 3. Seasonal (S) 4. Irregular (I)
 Trend component: The trend is the long term pattern of a time series
 Cyclical component: Any pattern showing an up and down movement around a given
trend is identified as a cyclical pattern.
 Seasonal component: Seasonality occurs when the time series exhibits regular
fluctuations during the same month (or months) every year, or during the same quarter
every year.
 Irregular component: This component is unpredictable

ITQ 1: What is time series data?

ITA 1: Time series data refers to observation of a particular variable over time. This type of data allows
the analyst to view the evolution of a variable over a period of time.

Global and Local Trends

  Global Trends: Using a simple linear trend model, the global trend of a variable can be
estimated.
 Local trend: A more modern approach is to consider trends in time series as variable.

Forecasting Forecasting (or prediction): refers to the process of generating future values of a
particular event. Forecasting can be done within the firm or on the economy.
Time series methods: Time series methods or models makes reference to models use in
forecasting where no "explanatory" variables are involved.
Moving averages: A moving average is a method to obtain a smoother picture of the behavior of
a series.
Two General Aspects of Time Series Patterns are Trends and Seasonality,

The trend represents a general systematic linear or (most often) nonlinear component that
changes over time and does not repeat or at least does not repeat within the time range
captured by our data while Seasonality repeats itself in systematic intervals over time.
the first step in the process of trend identification is smoothing. Smoothing always involves
some form of local averaging of data such that the nonsystematic components of individual
observations cancel each other out. The main disadvantage of median smoothing is that in the
absence of clear outliers it may produce more "jagged" curves than moving average and it does
not allow for weighting. There are two main goals of time series analysis: (a) Identifying the
nature of the phenomenon represented by the sequence of observations (b) Forecasting
(predicting future values of the time series variable.

ITQ 2: What is the main objective of time series method?

ITA 2: The main objective of time series methods is forecasting future values. These models include
smoothing methods (moving averages, single and double exponential smoothing, and Holt-Winters
exponential smoothing).

STUDY 3: Regression Analysis

Linear Regression Regression estimates are used to describe data and to explain the
relationship between one dependent variable and one or more independent variables. It
consists of 3 stages – (1) analyzing the correlation and directionality of the data, (2) estimating
the mode
Uses of linear. Might be used to identify the strength of the effect that the independent
variable(s) have on a dependent variable. It can be used to forecast effects or impacts of
changes.
Regression analysis predicts trends and future values

ITQ 1: What is Regression analysis used for in research?

ITA 1: Regression analysis is used to predict the behaviour of the dependent variables, based on the set
of independent variables.
Assumptions:
1. There is normal distribution.
2. There is a linear relationship between the dependent and independent variable.
 3. There is no multicollinearity between the independent variables or no exact correlation
between the independent variable.
4. There is no autocorrelation.
5. The means lagged value of the regression variable does not affect the current value.
6. The homoscedasticity or variance between all the independent variables is equal.
(Y = α + βX )
Y = the continuous dependent variable
X = the independent variable (can be a categorical dummy variable)
α = the Y intercept (regression line intercepts Y axis)
β = the slope of the coefficient (rise over run)

ITQ 2: Write out the Regression equation?

ITA 2: The Regression Equation (Y = α + βX )

STUDY 4: The Game Theory

Cooperative game theory provides a high-level approach as it only describes the structure,
strategies and payoffs of coalitions, whereas non-cooperative game theory also looks at how
bargaining procedures will affect the distribution of payoffs within each coalition. As non-
cooperative game theory is more general, cooperative games can be analyzed through the
approach of non-cooperative game theory (the converse does not hold) provided that sufficient
assumptions are made to encompass all the possible strategies available to players due to the
possibility of external enforcement of cooperation.
 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. asymmetric games
are games where there are not identical strategy sets for both players
 Zero-sum games are a special case of constant-sum games, in which choices by players
can neither increase nor decrease the available resources. non-zero-sum games, a gain
by one player does not necessarily correspond with a loss by another
 Simultaneous games are games where both players move simultaneously, or if they do
not move simultaneously. The difference between simultaneous and sequential games
is captured in the different representations. Often, normal form is used to represent
simultaneous games, while extensive form is used to represent sequential ones.
 Combinatorial games -Games in which the difficulty of finding an optimal strategy stems
from the multiplicity of possible moves are called combinatorial games
 Infinitely long games -Games, as studied by economists and real-world game players,
are generally finished in finitely many moves.
 Discrete games, that have a finite number of players, moves, events, outcomes, etc.
 Continuous games allow players to choose a strategy from continuous strategy set
 Differential games such as the continuous pursuit and evasion game are continuous
games where the evolution of the players' state variables is governed by differential
equations.
 Many-player and population games Games with an arbitrary, but finite, number of
players are often called n-person games.
  Metagames These are games the play of which is the development of the rules for
another game, the target or subject game.
 Pooling games -These are games prevailing over all forms of society. Pooling games are
repeated plays with changing payoff table in general over an experienced path and their
equilibrium strategies usually take a form of evolutionary social convention and
economic convention.

ITQ 1: Define Game theory

ITA 1: Game theory is "the study of mathematical models of conflict and cooperation between
intelligent rational decision-makers".

ITQ 2: Differentiate between cooperative and non- cooperative game

ITA 2: 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).