Normal form game

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In game theory, normal form is a way of describing a game. Unlike extensive form, normal form representations are not graphical per se, but rather represents the game with a matrix. This can be of greater use in identifying strictly dominated strategies and Nash equilibria, on the other hand some information is lost as compared to extensive form representations. The normal form representation of game includes all strategies of each player and payoffs for each strategy profile are represented.

In static games of complete, perfect information, a normal form representation of a game is a specification of players' strategy spaces and payoff functions. A strategy space for a player is the set of all strategies available to that player, where a strategy is a complete plan of action for every stage of the game, regardless of whether that stage actually arises in play. A payoff function for a player is a mapping from the cross-product of players' strategy spaces to that player's set of payoffs (normally the set of real numbers, where the number represents a cardinal or ordinal utility - often cardinal in the normal form representation) of a player, i.e. the payoff function of a player takes as its input a strategy profile (that is a specification of strategies for every player) and yields a representation of payoff as its output.

A similar concept is used for Payoff Matrices in business management. Basically you set up a diagram like the ones below and choose the one that that has the best "worst-case" scenario.

1 An example
- 1.1 Other representations
2 Uses of normal form
- 2.1 Dominated strategies
- 2.2 Sequential games in normal form
3 General formulation
4 References
5 External links

[edit] An example

*A normal form game*
	Player 2 chooses left	Player 2 chooses right
Player 1 chooses top	4, 3	-1, -1
Player 1 chooses bottom	0, 0	3, 4

The matrix to the right is a normal form representation of a game in which players move simultaneously (or at least do not observe the other player's move before making their own) and receive the payoffs as specified for the combinations of actions played. For example, if player 1 plays top and player 2 plays left, player 1 receives 4 and player 2 receives 3. In each cell, the first number represents the payoff to the row player (in this case player 1), and the second number represents the payoff to the column player (in this case player 2).

[edit] Other representations

Often symmetric games (where the payoffs do not depend on which player chooses each action) are represented with only one payoff. This is the payoff for the row player. For example, the payoff matrices on the right and left below represent the same game.

*Both players*
	Stag	Hare
Stag	3, 3	0, 2
Hare	2, 0	2, 2

*Just row*
	Stag	Hare
Stag	3	0
Hare	2	2

[edit] Uses of normal form

[edit] Dominated strategies

*The Prisoner's Dilemma*
	Cooperate	Defect
Cooperate	2, 2	0, 3
Defect	3, 0	1, 1

The payoff matrix facilitates elimination of dominated strategies, and it is usually used to illustrate this concept. For example, in the prisoner's dilemma (to the right), one can determine that Cooperate is strictly dominated by Defect. One must compare the first numbers in each column, in this case 3>2 and 1>0. This shows that no matter what the column player chooses, the row player does better by choosing Defect. Similarly, one compares the second payoff in each row; again 3>2 and 1>0. This shows that no matter what row does, column does better by choosing Defect. This demonstrates the unique Nash equilibrium of this game is (Defect, Defect).

[edit] Sequential games in normal form

*A sequential game*
	Left, Left	Left, Right	Right, Left	Right, Right
Top	4, 3	4, 3	-1, -1	-1, -1
Bottom	0, 0	3, 4	0, 0	3, 4

These matrices only represent games in which moves are simultaneous (or, more generally, information is imperfect). The above matrix does not represent the game in which player 1 moves first, observed by player 2 and then player 2 moves because it does not specify each of player 2's strategies in this case. In order to represent this sequential game we must specify all of player 2's actions, even in contingencies that can never arise in the course of the game. In this game, player 2 has actions, as before, Left and Right. Unlike before he has four strategies, contingent on player 1's actions. The strategies are:

Left if player 1 plays Top and Left otherwise
Left if player plays Top and Right otherwise
Right if player plays Top and Left otherwise
Right if player plays Top and Right otherwise

On the right is the normal form representation of this game.

[edit] General formulation

In order for a game to be in normal form, we are provided the following data:

There is a finite set P of players, which we label {1, 2, ..., m}

Each player k in P has a finite number of pure strategies

$S_k = \{1, 2, \ldots, n_k\}.$

A pure strategy profile is an association of strategies to players, that is an m-tuple

$\vec{\sigma} = (\sigma_1, \sigma_2, \ldots,\sigma_m)$

such that

$\sigma_1 \in S_1, \sigma_2 \in S_2, \ldots, \sigma_m \in S_m$

We will denote the set of strategy profiles by Σ

A payoff function is a function

$F: \Sigma \rightarrow \mathbb{R}.$

whose intended interpretation is the award given to a single player at the outcome of the game. Accordingly, to completely specify a game, the payoff function has to be specified for each player in the player set P= {1, 2, ..., m}.

Definition. A game in normal form is a structure

$(P, \mathbf{S}, \mathbf{F})$

where P = {1,2, ...,m} is a set of players,

$\mathbf{S}= (S_1, S_2, \ldots, S_m)$

is an m-tuple of pure strategy sets, one for each player, and

$\mathbf{F} = (F_1, F_2, \ldots, F_m)$

is an m-tuple of payoff functions.

There is no reason in the previous discussion to exclude games which have an infinite number of players or an infinite number of strategies per player. The study of infinite games is more difficult however, since it requires use of functional analytic techniques.

[edit] References

R. D. Luce and H. Raiffa, Games and Decisions, Dover Publications, 1989.

J. Weibull, Evolutionary Game Theory, MIT Press, 1996

J. von Neumann and O. Morgenstern, Theory of games and Economic Behavior, John Wiley Science Editions, 1964. This book was initially published by Princeton University Press in 1944.

[edit] External links

http://www.whalens.org/Sofia/choice/matrix.htm

v • d • e	Topics in game theory
Definitions	Normal form game · Extensive form game · Cooperative game · Information set · Preference
Equilibrium concepts	Nash equilibrium · Subgame perfection · Bayes-Nash · Trembling hand · Correlated equilibrium · Sequential equilibrium · Quasi-perfect equilibrium · Evolutionarily stable strategy
Strategies	Dominant strategies · Mixed strategy · Grim trigger · Tit for Tat
Classes of games	Symmetric game · Perfect information · Dynamic game · Repeated game · Signaling game · Cheap talk · Zero-sum game · Mechanism design
Games	Prisoner's dilemma · Coordination game · Chicken · Battle of the sexes · Stag hunt · Matching pennies · Ultimatum game · Minority game · Rock, Paper, Scissors · Pirate game · Dictator game
Theorems	Minimax theorem · Purification theorems · Folk theorem · Revelation principle
Related topics	Mathematics · Economics · Behavioral economics · Evolutionary game theory · Population genetics · Behavioral ecology · Adaptive dynamics · List of game theorists