Game Theory: Interactive Decision Theory
The purpose of the game: profit maximization
The 4 elements of the game:
1.2+ participants
2. The game must have resources that all parties compete for
3. Participants have strategies they can choose
4. Participants have certain information
Common Analysis Tool: Profit Matrix
The strategies of all players are interdependent, and the results obtained by each player depend not only on their own strategic choices, but also on the strategic choices of other participants.
Nash Equilibrium: A combination of players' strategies over which no player benefits from changing strategies alone . In other words, if on a strategy combination, when no one else changes their strategy, no one changes their own strategy, then the strategy combination is a Nash equilibrium.
Dominant strategy: no matter what strategy the opponent adopts, the strategy I take is better than any other strategy
Limitations of Game Theory
Game theory assumes that people are rational, but in reality people are often irrational when making decisions. Moreover, people's time and energy are limited, and it is impossible for people to collect all the information they need.
Example 1:
Wu Zixu fled and was caught by the guards, Wu Zixu threatened: "Do you know why the King of Chu arrested me, because the King of Chu knew that I had a jewel, and the King of Chu wanted it with all his heart, but my jewel was lost, and the King of Chu did not believe it. So I had to run away, now you have caught me, then I will say in front of the King of Chu that you stole the orb and swallowed it in your stomach, the King of Chu will kill you first in order to get the orb." The guard believed it was true and released Wu Zixu. .
Return Matrix 
Wu Zixu's threatening action turned the original game of simultaneous moves into a game of successive moves, and Wu Zixu moved first, and Wu Zixu took advantage of information asymmetry to pull the guards into a situation similar to the prisoner's dilemma.
Revelation: When you are at a disadvantage, create a predicament and make the other party fall into the same predicament that you cannot escape. At this time, he can only be forced to make rational decisions and cooperate with you. Changing the pattern of game participants by design is likely to change the original decision-making of the players. One of the most commonly used methods is to intentionally create information asymmetry.
Single game and repeated game
Anticipation of the future affects our behavior, a single game means a high probability of betrayal, while in a repeated game, there are countless opportunities to punish the betrayal. Then transforming a single game into a repeated game can effectively improve the possibility of cooperation
A contract with a sword is valid
A valid contract contains 2 elements
1. Punishment mechanism
2. Repeated game, if the prisoner's dilemma is a one-time game, then it is meaningless to sign an agreement
Finite and infinite games
When the finite-time game approaches the end of the game, the possibility of adopting a non-cooperative strategy increases.
The solution to this dilemma is to never allow any definite final game to appear within sight.
Example 2:
A scientist held a computer simulation competition to simulate the Prisoner's Dilemma. A total of 63 programs participated in the simulation competition, and the winning program performed the strategy of "tit for tat". That is, the first step is cooperation, and each step thereafter repeats the action of the other party in the previous step: cooperation or betrayal. Such a simple program wins because it pursues the principle of doing what is right for another and encourages the long-term cooperation of other programs with the following characteristics.
kind, irritable, tolerant, simple, not jealous of others' success
Kindness: The first step is to always express kindness to the other party, insist on never betraying the other party first, and always choose cooperation at the beginning
Inflammable: Refers to the ability to recognize and take betrayal actions to retaliate when the other party betrays
Tolerance: not endless revenge for one betrayal by others
Simple: Refers to its clear logic, which can be recognized by others in a short period of time
Not jealous: means that it does not play tricks, does not take advantage of the other party, and does not compete for strength in any bilateral relationship
Through further research, Exrod found that the necessary conditions for cooperation are
1. Repeated game
2. Reward, cooperate or betray the other's behavior
So how to improve cooperation?
1. Build lasting relationships
2. Enhance the ability to recognize each other's actions. If it is not clear whether the other party is cooperating or betrayal, there is no way to repay the other party.
3. To maintain your reputation, you must do it when you say revenge, and the other party will know that you are not easy to bully
4. A game that can be completed in steps should not be completed at one time to maintain a long-term relationship. For example, trade, negotiation has to be carried out step by step
5. Don’t be jealous of other people’s success