Part I - Strategic interactions as games

Summary

INTRODUCTION

Social interaction is essential to human life. How do people choose what to do when they encounter one another? And how do organizations, firms or countries interact? Game theory is a modeling tool designed to represent and analyze such strategic interaction.

The first part of this book is devoted to introducing the basic building blocks of game theory. The parties to the interaction are called players, the courses of actions available to them are their strategies, and the payoffs of each player from the various profiles of strategies (of all players) represent the way each player ranks the possible outcomes of the interaction from her own individual point of view.

Chapter 1 will be devoted to the definition of these concepts, and their illustration with a preliminary example. Chapter 2 will expand on these modeling considerations in concrete realworld examples. The first of these will be a historical military episode in the Middle East. Additional examples will concern competition over promotion in the workplace, and the design of incentives for teamwork. The considerations elaborated in the modeling process will set the stage for analyzing and predicting the outcomes of such strategic encounters in the chapters that follow.