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Sequential games are a type of game theory model where players make decisions one after another, with each player being aware of the previous players' actions. This structure allows for the strategic consideration of future moves and can lead to equilibrium outcomes such as subgame perfect equilibrium.
Game theory is a mathematical framework used for analyzing strategic interactions where the outcome for each participant depends on the actions of all involved. It provides insights into competitive and cooperative behaviors in economics, politics, and beyond, helping to predict and explain decision-making processes in complex scenarios.
Subgame Perfect Equilibrium is a refinement of Nash Equilibrium applicable in dynamic games, ensuring that players' strategies constitute a Nash Equilibrium in every subgame of the original game. It eliminates non-credible threats by requiring that strategies be optimal not just for the game as a whole, but for every point at which a decision is made.
Backward induction is a method used in game theory and decision-making processes to determine the optimal strategy by analyzing the game from the end to the beginning. It involves breaking down a complex problem into simpler sub-problems and solving them in reverse order to ensure rational decision-making at every stage.
Nash Equilibrium is a fundamental concept in game theory where each player's strategy is optimal given the strategies of all other players, meaning no player can benefit by unilaterally changing their strategy. It is used to predict the outcome of strategic interactions in competitive environments, assuming that all players are rational and have complete knowledge of the game structure.
Perfect information refers to a situation in which all participants in an economic or strategic interaction have complete and accurate knowledge of all relevant factors, including the actions and payoffs of other participants. This concept is crucial in game theory and economics, as it allows for the prediction of outcomes where no player has an informational advantage over others.
Decision trees are a versatile machine learning model used for both classification and regression tasks, where data is split into branches to form a tree-like structure based on feature values. They are highly interpretable and can handle both numerical and categorical data, but they may require pruning to avoid overfitting and ensure generalization to new data.
A Stackelberg Game is a strategic game in economics and related fields where one player, the leader, commits to a strategy first, and then the follower chooses their strategy with knowledge of the leader's action. This model is pivotal in understanding sequential decision-making processes and is widely applied in market competition, policy-making, and supply chain management.
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