Question: a game is a strategic interaction between two players each...
A game is a strategic interaction between two players. Each player has their own sets of actions called the strategies. Each strategy comes with a definite outcome, these outcomes are tied to some profit or loss called the payoff. One of the favorite examples of game theory is the Prisoners' dilemma.
In this game, two partners of crime are caught by police and held in different cells being interrogated separately. Both have two options, either to confess or be silent. The payoff they receive is in terms of years in jail. For example, if they both confess they get 12 years in jail and thus the payoff is -12 for each for strategy (confess, confess).
The game table is completed as below
Reflect on your example: do you think the game theory tools above help you predict the real-world outcome? What things are missing? How could you change your example to better match the real world? Be specific!