polimd/Game Theory/lesson_03.md

Game Theory - lesson 3

12 October 2016

Extensive form

Example

Three politicians must vote if to raise or not their salaries. Vote is public and in sequence. All of them want to raise the salaries but would like to vote against.

Main Features

1. The moves are in sequence
2. Every possible situation is known to the players. At any time they know the past history and the possible developments.

The complete game can be represented as a tree

• The vertex representing the initial situation
• The leaves representing the final situations of the game

Backward Induction

We start from the final situation and we go back to the initial situation. A finite lenght is required for the game.