Definition Strategic Situation
- what is best for me depends on the others are doing
- what is best for others depends on what I am doing
Implications
- complex dynamics
- I know
- they know, I know
- I know, they know, I know,
- …
- outcomes are different
- agents are players
- interaction called “game”
Definition Strategy
- strategy = information + reaction
- complete plan of action
- in business: a plan to achieve an organizations goals and objectives from which - ideally - each person can derive their own smaller goals
- strategy is a complete plan of action for a game
- simple with rock/paper/scissors
- harder with chess
- at every point in the game we know what to do
Conditions
- time of action
- outcome of nature moves (random events)
- new information arriving
- observed actions of other agents
Develop a good Strategy
- think about
- rules of interaction
- strategies/actions available to other players
- role of nature/randomness
- value of information
- think about your best action
- at each point in time
- in each state of the world
- for each move of other players
- write it down
- forces the brain to think clear thoughts
Equilibrium