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Page iii

A Course in Game Theory
Martin J. Osborne
Ariel Rubinstein
The MIT Press
Cambridge, Massachusetts
London, England

Page iv

Copyright © 1994 Massachusetts Institute of Technology
All rights reserved. No part of this book may be reproduced in any form by any electronic. or mechanical means
(including photocopying, recording, or information storage and retrieval) without permission in writing from the
publisher.
This book was typeset by the authors, who are greatly indebted to Donald Knuth (the creator of TEX), Leslie
Lamport (the creator of LATEX), and Eberhard Mattes (the creator of emTEX) for generously putting superlative
software in the public domain. Camera-ready copy was produced by Type 2000, Mill Valley, California, and the
book was printed and bound by The Maple-Vail Book Manufacturing Group, Binghamton, New York.
Osborne, Martin J.
A course in game theory I Martin J. Osborne, Ariel Rubinstein.
p. cm.
Includes bibliographical references and index.
ISBN 0-262-15041-7.—ISBN 0-262-65040-1 (pbk.)
1. Game theory. I. Rubinstein, Ariel. II. Title.
HB 144.0733 1994
658.4'0353-dc20
94-8308
CIP
Fifth printing, 1998

Page v

CONTENTS
Preface

xi

1
Introduction

1

1.1 Game Theory

1

1.2 Games and Solutions

2

1.3 Game Theory and the Theory of Competitive Equilibrium

3

1.4 Rational Behavior

4

1.5 The Steady State and Deductive Interpretations

5

1.6 Bounded Rationality

6

1.7 Terminology and Notation

6

Notes

8

I
Strategic Games

9

2
Nash Equilibrium

11

2.1 Strategic Games

11

2.2 Nash Equilibrium

14

2.3 Examples

15

2.4 Existence of a Nash Equilibrium

19

2.5 Strictly Competitive Games

21

2.6 Bayesian Games: Strategic Games with Imperfect Information

24

Notes

29

Page vi

3
Mixed, Correlated, and Evolutionary Equilibrium

31

3.1 Mixed Strategy Nash Equilibrium

31

3.2 Interpretations of Mixed Strategy Nash Equilibrium

37

3.3 Correlated Equilibrium

44

3.4 Evolutionary Equilibrium

48

Notes

51

4
Rationalizability and Iterated Elimination of Dominated Actions

53

4.1 Rationalizability

53

4.2 Iterated Elimination of Strictly Dominated Actions

58

4.3 Iterated Elimination of Weakly Dominated Actions

62

Notes

64

5
Knowledge and Equilibrium

67

5.1 A Model of Knowledge

67

5.2 Common Knowledge

73

5.3 Can People Agree to Disagree?

75

5.4 Knowledge and Solution Concepts

76

5.5 The Electronic Mail Game

81

Notes

84

II
Extensive Games with Perfect Information

87

6
Extensive Games with Perfect Informati...
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