Economics Game Theory Questions
The main assumptions of game theory are as follows:
1. Rationality: All players are assumed to be rational decision-makers, meaning they act in their own self-interest and strive to maximize their own utility or payoff.
2. Complete information: Players have complete and perfect information about the game, including knowledge of the rules, strategies, and payoffs of all players involved.
3. Simultaneous or sequential moves: Games can be either simultaneous, where players make their decisions simultaneously without knowing the choices of others, or sequential, where players take turns making decisions with knowledge of the previous players' choices.
4. Finite number of players: Game theory assumes a finite number of players involved in the game. This allows for a more manageable analysis of strategies and outcomes.
5. Fixed rules and payoffs: The rules of the game and the payoffs associated with different outcomes are fixed and known to all players. These payoffs determine the players' preferences and guide their decision-making.
6. No cooperation or communication: Players are assumed to act independently and without the ability to communicate or cooperate with each other. This assumption helps analyze strategic interactions where players cannot trust or rely on each other.
It is important to note that these assumptions may vary depending on the specific game being analyzed and the context in which it is applied.