Game Theory

Strategic Games

Typically a strategic game is one that is played only once, and in which each player assumes that the other players are behaving rationally. Even though the outcomes are a function of both the individual's choice and the other player's choice, players make their decisions independently and simultaneously—the only reference point being a matrix of the players' possible behaviors (decisions) and corresponding payoffs, as noted by Osborne and Rubinstein in 1994. In this case, the immediate payoff is highly salient to each player, since it involves only one trial.

Intertemporal, Repeated-Trial Games

These games are played over repeated trials, and involve a situation in which the player's behavior both has instantaneous consequences on personal payoffs, and can affect the other player's future behavior, as evidenced by the resulting joint payoffs. In this case the long-run, coordinated payoff is highly salient to each [Page 532]player, since it involves not only his or her individual decision on a single trial, but also the combined effects of his or her decision and the other player's decision.

Players

Any person, group, entity, organization, or country (geographic area) that has a single interest driving its decisions can be thought of as a player within a game theory paradigm, as noted by Luce and Raiffa in 1957. Although games are typically described in relation to two players, many are described as n-person games.

Utility

Assuming that utility is an economic measure of desired outcomes, it is expected that individuals and groups are inherently motivated to maximize their utility whenever possible, à la Jacob Marschak in 1950; however, it is also true that in some situations there is a conflict between immediate self-interest and long-run group interest.

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