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Game theory & Linear Programming

Game theory & Linear Programming. Steve Gu Mar 28, 2008. Outline. Background Nash Equilibrium Zero-Sum Game How to Find NE using LP? Summary. Background: History of Game Theory. John Von Neumann 1903 – 1957. Book - Theory of Games and Economic Behavior. John Forbes Nash 1928 –

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Game theory & Linear Programming

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  1. Game theory & Linear Programming Steve Gu Mar 28, 2008

  2. Outline • Background • Nash Equilibrium • Zero-Sum Game • How to Find NE using LP? • Summary

  3. Background: History of Game Theory • John Von Neumann 1903 – 1957. • Book - Theory of Games and Economic Behavior. • John Forbes Nash 1928 – • Popularized Game Theory with his Nash Equilibrium (Nobel prize).

  4. Background: Game theory

  5. Background: Prison’s Dilemma Given you’re Dave, what’s the best choice?

  6. Nash Equilibrium A set of strategies is a Nash equilibrium if no player can do better by changing his or her strategy

  7. Nash Equilibrium (Cont’) • Nash showed (1950), that Nash equilibria (in mixed strategies) must exist for all finite games with any number of players. • Before Nash's work, this had been proven for two-player zero-sum games (by John von Neumann and Oskar Morgenstern in 1947). • Today, we’re going to find such Nash equilibria using Linear Programming for zero-sum game

  8. Zero-Sum Game • A strictly competitive or zero-sum game is a 2-player strategic game such that for each action aA, we have u1(a) + u2(a) = 0. (u represents for utility) • What is good for me, is bad for my opponent and vice versa

  9. Zero-Sum Game • Mixed strategy • Making choice randomly obeying some kind of probability distribution • Why mixed strategy? (Nash Equilibrium) • E.g. : P(1) = P(2) = 0.5; P(A) = P(B)=P(C)=1/3

  10. Solving Zero-Sum Games • Let A1 = {a11, …, a1n }, A2 = {a21, …, a2m } • Player 1 looks for a mixed strategy p • ∑i p(a1i ) = 1 • p(a1i ) ≥ 0 • ∑i p(a1i ) · u1(a1i, a2j) ≥ r for all j {1, …, m} • Maximize r! • Similarly for player 2.

  11. Solve using Linear Programming • What are the unknowns? • Strategy (or probability distribution): p • p(a11 ), p(a12 ),..., p(a1n-1 ), p(a1n )~n numbers • Denoted as p1,p2,...,pn-1,pn • Optimum Utility or Reward: r • Stack all unknowns into a column vector • Goal: maximize: where

  12. Solve Zero-Sum Game using LP • What are the constraints?

  13. Solve Zero-Sum Game using LP Let: Ae=(0,1,…,1) Aie=(1;-UT) f=(1,0,…,0)T The LP is: maximize fTx subject to: Aiex<=0 Aex=1

  14. Summary • Zero-Sum Game  Mixed Strategy  NE • Connections with Linear Programming

  15. ThanksQ&A

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