Economics Game Theory In Behavioral Economics Questions Medium
Extensive form games are a type of game theory model that represents sequential decision-making situations. They are used to analyze strategic interactions where players make decisions in a specific order, taking into account the actions and decisions of previous players.
The representation of extensive form games involves a game tree, which visually depicts the sequence of actions and decisions. The game tree consists of nodes and branches. Nodes represent decision points, where players choose among different actions, and branches represent the possible outcomes or consequences of those actions.
At the beginning of the game, there is a single node called the initial node, which represents the starting point. From the initial node, branches emerge, representing the different actions that the first player can take. Each branch leads to a new node, representing the decision point for the next player in the sequence. This process continues until all players have made their decisions, and the game reaches its final outcome.
In addition to decision nodes, extensive form games also include chance nodes, which represent random events or uncertainties that affect the outcome of the game. These chance nodes introduce an element of uncertainty and can lead to different outcomes based on the probabilities associated with each branch.
Overall, the concept of extensive form games and their representation provide a framework for analyzing strategic interactions in a sequential manner, considering the decisions and actions of all players involved. By visually representing the game tree, it becomes easier to analyze and predict the possible outcomes and strategies that players may adopt.