Introduction to Game Theory. Outline. Topics. Recall how we model rationality. Notes. Notes. Notes. Notes. Tyler Moore.

Similar documents
Introduction to Game Theory. Outline. Proposal feedback. Proposal feedback: written feedback. Notes. Notes. Notes. Notes. Tyler Moore.

Computing Minmax; Dominance

Quantum Games. Quantum Strategies in Classical Games. Presented by Yaniv Carmeli

Computing Minmax; Dominance

Static (or Simultaneous- Move) Games of Complete Information

CS 798: Multiagent Systems

Game Theory. Professor Peter Cramton Economics 300

Theory of Auctions. Carlos Hurtado. Jun 23th, Department of Economics University of Illinois at Urbana-Champaign

Game Theory, Evolutionary Dynamics, and Multi-Agent Learning. Prof. Nicola Gatti

Introduction to Game Theory

Introduction to Game Theory Lecture Note 2: Strategic-Form Games and Nash Equilibrium (2)

A (Brief) Introduction to Game Theory

Economics 703 Advanced Microeconomics. Professor Peter Cramton Fall 2017

Game Theory for Linguists

UC Berkeley Haas School of Business Game Theory (EMBA 296 & EWMBA 211) Summer 2016

Advanced Microeconomics

Industrial Organization Lecture 3: Game Theory

Introduction to game theory LECTURE 1

Computation of Efficient Nash Equilibria for experimental economic games

Iterated Strict Dominance in Pure Strategies

Bounded Rationality Lecture 2. Full (Substantive, Economic) Rationality

First Prev Next Last Go Back Full Screen Close Quit. Game Theory. Giorgio Fagiolo

Question 1. (p p) (x(p, w ) x(p, w)) 0. with strict inequality if x(p, w) x(p, w ).

Prisoner s Dilemma. Veronica Ciocanel. February 25, 2013

A Polynomial-time Nash Equilibrium Algorithm for Repeated Games

Game Theory and Algorithms Lecture 2: Nash Equilibria and Examples

1 Games in Normal Form (Strategic Form)

Microeconomics II Lecture 4: Incomplete Information Karl Wärneryd Stockholm School of Economics November 2016

C31: Game Theory, Lecture 1

Evolutionary Game Theory

Understanding and Solving Societal Problems with Modeling and Simulation

Lecture Notes on Game Theory

Quantum Games Have No News for Economists 1

Area I: Contract Theory Question (Econ 206)

Game Theory Fall 2003

Strategic Games: Social Optima and Nash Equilibria

Game Theory Lecture Notes

VII. Cooperation & Competition

Satisfaction Equilibrium: Achieving Cooperation in Incomplete Information Games

Algorithmic Game Theory. Alexander Skopalik

Normal-form games. Vincent Conitzer

For general queries, contact

Game Theory: Spring 2017

Microeconomics. 2. Game Theory

Non-zero-sum Game and Nash Equilibarium

Basic Game Theory. Kate Larson. January 7, University of Waterloo. Kate Larson. What is Game Theory? Normal Form Games. Computing Equilibria

SF2972 Game Theory Exam with Solutions March 15, 2013

Game Theory Review Questions

Economics 3012 Strategic Behavior Andy McLennan October 20, 2006

Area I: Contract Theory Question (Econ 206)

Introduction to Quantum Game Theory

Microeconomics for Business Practice Session 3 - Solutions

Lecture December 2009 Fall 2009 Scribe: R. Ring In this lecture we will talk about

Module 8: Multi-Agent Models of Moral Hazard

Bargaining Efficiency and the Repeated Prisoners Dilemma. Bhaskar Chakravorti* and John Conley**

6.207/14.15: Networks Lecture 10: Introduction to Game Theory 2

Review of Probability, Expected Utility

Chapter 7. Evolutionary Game Theory

Basics of Game Theory

Mathematical Games and Random Walks

Political Economy of Institutions and Development: Problem Set 1. Due Date: Thursday, February 23, in class.

General-sum games. I.e., pretend that the opponent is only trying to hurt you. If Column was trying to hurt Row, Column would play Left, so

Week of May 5, lecture 1: Expected utility theory

Games of Elimination

Game Theory: introduction and applications to computer networks

6.891 Games, Decision, and Computation February 5, Lecture 2

Economics 201B Economic Theory (Spring 2017) Bargaining. Topics: the axiomatic approach (OR 15) and the strategic approach (OR 7).

The ambiguous impact of contracts on competition in the electricity market Yves Smeers

Game Theory -- Lecture 4. Patrick Loiseau EURECOM Fall 2016

6.207/14.15: Networks Lecture 11: Introduction to Game Theory 3

arxiv:quant-ph/ v3 18 Aug 2004

Game Theory. Monika Köppl-Turyna. Winter 2017/2018. Institute for Analytical Economics Vienna University of Economics and Business

Notes on Coursera s Game Theory

Players as Serial or Parallel Random Access Machines. Timothy Van Zandt. INSEAD (France)

GAMES: MIXED STRATEGIES

Lecture Slides - Part 4

Msc Micro I exam. Lecturer: Todd Kaplan.

Title: The Castle on the Hill. Author: David K. Levine. Department of Economics UCLA. Los Angeles, CA phone/fax

: Cryptography and Game Theory Ran Canetti and Alon Rosen. Lecture 8

Institut für Höhere Studien (IHS), Wien Institute for Advanced Studies, Vienna

Other-Regarding Preferences: Theory and Evidence

Mixed strategy equilibria (msne) with N players

Chapter 2. Equilibrium. 2.1 Complete Information Games

We set up the basic model of two-sided, one-to-one matching

University of Warwick, Department of Economics Spring Final Exam. Answer TWO questions. All questions carry equal weight. Time allowed 2 hours.

NASH IMPLEMENTATION USING SIMPLE MECHANISMS WITHOUT UNDESIRABLE MIXED-STRATEGY EQUILIBRIA

Selecting Efficient Correlated Equilibria Through Distributed Learning. Jason R. Marden

Computation of Nash Equilibria of Two-Person Non-Cooperative Games with Maple

Chapter 2. Equilibrium. 2.1 Complete Information Games

Mohammad Hossein Manshaei 1394

A Folk Theorem For Stochastic Games With Finite Horizon

Evolutionary Game Theory and Frequency Dependent Selection

Belief-based Learning

The Adjusted Winner Procedure : Characterizations and Equilibria

SURPLUS SHARING WITH A TWO-STAGE MECHANISM. By Todd R. Kaplan and David Wettstein 1. Ben-Gurion University of the Negev, Israel. 1.

Bargaining, Contracts, and Theories of the Firm. Dr. Margaret Meyer Nuffield College

MAS and Games. Department of Informatics Clausthal University of Technology SS 18

6.254 : Game Theory with Engineering Applications Lecture 13: Extensive Form Games

Recap Social Choice Fun Game Voting Paradoxes Properties. Social Choice. Lecture 11. Social Choice Lecture 11, Slide 1

Transcription:

Introduction to Game Theory Tyler Moore Tandy School of Computer Science, University of Tulsa Slides are modified from version written by Benjamin Johnson, UC Berkeley Lecture 15 16 Outline 1 Preferences and outcomes Utility 2 2 / 41 Topics We now discuss the final big idea in the course 1 Introduction 2 Security metrics and investment 3 Measuring cybercrime 4 Security games We now consider strategic interaction between players 3 / 41 Recall how we model rationality Preferences and outcomes Economics attempts to model the decisions we make, when faced with multiple choices and when interacting with other strategic agents Rational choice theory (RCT): model for decision-making (GT): extends RCT to model strategic interactions 5 / 41

Model of preferences Preferences and outcomes An agent is faced with a range of possible outcomes o 1, o 2 O, the set of all possible outcomes Notation o 1 o 2 : the agent is strictly prefers o 1 to o 2. o 1 o 2 : the agent weakly prefers o 1 to o 2 ; o 1 o 2 : the agent is indifferent between o 1 and o 2 ; Outcomes can be also viewed as tuples of different properties ˆx, ŷ O, where ˆx = (x 1, x 2,..., x n ) and ŷ = (y 1, y 2,..., y n ) 6 / 41 Rational choice axioms Preferences and outcomes Rational choice theory assumes consistency in how outcomes are preferred. Axiom Completeness. For each pair of outcomes o 1 and o 2, exactly one of the following holds: o 1 o 2, o 1 o 2, or o 2 o 1. Outcomes can always be compared Axiom Transitivity. For each triple of outcomes o 1, o 2, and o 3, if o 1 o 2 and o 2 o 3, then o 1 o 3. People make choices among many different outcomes in a consistent manner 7 / 41 Utility Utility Rational choice theory defines utility as a way of quantifying consumer preferences Definition (Utility function) A utility function U maps a set of outcomes onto real-valued numbers, that is, U : O R. U is defined such that U(o 1 ) > U(o 2 ) o 1 o 2. Agents make a rational decision by picking the outcome with highest utility: o = arg max U(o) (1) o O 8 / 41 Why isn t utility theory enough? Only rarely do actions people take directly determine outcomes Instead there is uncertainty about which outcome will come to pass More realistic model: agent selects action a from set of all possible actions A, and then outcomes O are associated with probability distribution 9 / 41

Expected utility Definition (Expected utility (discrete)) The expected utility of an action a A is defined by adding up the utility for all outcomes weighed by their probability of occurrence: X E [U(a)] = U(o) P(o a) (2) o O Agents make a rational decision by maximizing expected utility: a = arg max E [U(a)] (3) a A 10 / 41 Example: process control system security Source: http://www.cl.cam.ac.uk/~fms27/papers/2011-leverett-industrial.pdf 11 / 41 Example: process control system security Actions available: A = {disconnect, connect} Outcomes available: O = {successful attack, no successful attack} Probability of successful attack is 0.01 (P(attack connect) = 0.01) If systems are disconnected, then P(attack disconnect) = 0 12 / 41 Example: process control system security successful attack P(attack action) Action U connect disconnect -50-10 0.01 0 U no succ. attack P(no attack action) E [U(action)] 10-10 0.99 1 9.4-10 risk-neutral IT security manager chooses to connect since E [U(connect)] > E [U(disconnect)]. This model assumes fixed probabilities for attack. Is this assumption realistic? 13 / 41

Games vs. Optimization Optimization: Player vs Nature Games: Player vs Player 15 / 41 Strategy Book of Qi War Business Policy 36 Stratagems (Examples) Befriend a distant state while attacking a neighbor Sacrifice the plum tree to preserve the peach tree Feign madness but keep your balance See http://en.wikipedia.org/wiki/thirty-six_stratagems 16 / 41 Representing a game with a payoff matrix Suppose we have two players A and B. A s actions AA = {u, d} B s actions AB = {l, r } Possible outcomes O = {(u, l), (u, r ), (d, l), (d, r )} We represent 2-player, 2-strategy games with a payoff matrix Player A chooses u Player A chooses d Player B chooses l Player B chooses r (UA (u, l), UB (u, l)) (UA (d, l), UB (d, l)) (UA (u, r ), UB (u, r )) (UA (d, r ), UB (d, r )) 17 / 41 Returning to the process control system example Suppose we have two players: plant security manager and a terrorist Manager s actions Amgr = {disconnect, connect} Terrorist s actions Aterr = {attack, don t attack} Possible outcomes O = {(a1, a3 ), (a1, a4 ), (a2, a3 ), (a2, a4 )} We represent 2-player, 2-strategy games with a payoff matrix attack Manager connect disconnect Terrorist don t attack ( 50, 50) ( 10, 10) (10, 0) ( 10, 0) 18 / 41

Important Notions Zero-Sum In a zero-sum game, the sum of player utilities is zero. zero-sum heads tails heads (1, 1) ( 1, 1) tails ( 1, 1) (1, 1) not zero-sum invest defer invest (1, 1) (1, 2) defer (2, 1) (0, 0) 19 / 41 How can we determine which outcome will happen? We look for particular solution concepts 1 Dominant strategy equilibrium 2 Nash equilibrium Pareto optimal outcomes 20 / 41 Dominant strategy equilibrium A player has a dominant strategy if that strategy achieves the highest payoff regardless of what other players do. A dominant strategy equilibrium is one in which each player has and plays her dominant strategy. Example 1: Dominant Strategy Equilibria? Bob left right Alice up (1, 2) (0, 1) down (2, 1) (1, 0) 21 / 41 Nash equilibrium Nash equilibrium A Nash equilibrium is an assignment of strategies to players such that no player can improve her utility by changing strategies. A Nash equilibrium is called strong if every player strictly prefers their strategy given the current configuration. It is called weak if at least one player is indifferent about changing strategies. Nash equilibrium for 2-player game For a 2-person game between players A and B, a pair of strategies (a i, a j ) is a Nash equilibrium if U A (a i, a j ) Utility A (a i, a j ) for every i A A where i i and U B (a i, a j ) U B (a i, a j ) for every j A B where j j. 22 / 41

Finding Nash equilibria Nash equilibrium for 2-player game For a 2-person game between players A and B, a pair of strategies (a i, a j ) is a Nash equilibrium if U A (a i, a j ) U A (a i, a j ) for every i A A where i i and U B (a i, a j ) U B (a i, a j ) for every j A B where j j. Example 1: Nash equilibria? (up,left) and (down, right) Bob left right Alice up (2, 1) (0, 0) down (0, 0) (1, 2) (up,left)?: (up,right)?: UA(up, left) > UA(down, left)? 2 > 0? yes! UB(up, left) > UB(up, right)? 1 > 0? yes! UA(up, right) > UA(down, right)? 0 > 1? no! UB(up, right) > UB(up, left)? 0 > 1? no! 23 / 41 Exercise: is there a dominant strategy or Nash equilibrium for these games? left right left right up (1, 1) (1, 2) down (2, 1) (0, 0) up (1, 1) ( 1, 1) down ( 1, 1) (1, 1) Pareto Optimality Definition An outcome of a game is Pareto optimal if no other outcome makes at least one player strictly better off, while leaving every player at least as well off. Example: Pareto-optimal outcome? everything except defect/defect cooperate defect cooperate ( 1, 1) ( 5, 0) defect (0, 5) ( 2, 2) 25 / 41 Prisoners dilemma deny confess deny ( 1, 1) ( 5, 0) confess (0, 5) ( 2, 2) 26 / 41

Thoughts on the Prisoners Dilemma Can you see why the equilibrium strategy is not always Pareto efficient? Exemplifies the difficulty of cooperation when players can t commit to a actions in advance In a repeated game, cooperation can emerge because anticipated future benefits shift rewards But we are studying one-shot games, where there is no anticipated future benefit Here s one way to use psychology to commit to a strategy: http://www.tutor2u.net/blog/index.php/economics/ comments/game-show-game-theory 27 / 41 Split or Steal split Nick steal Ibrahim split (6 800, 6 800) (0, 13 600) steal (13 600, 0) (0, 0) 28 / 41 Prisoners dilemma in infosec: sharing security data share don t share share ( 1, 1) ( 5, 0) don t share (0, 5) ( 2, 2) Note, this only applies when both parties are of the same type, and can benefit each other from sharing. Doesn t apply in the case of take-down companies due to the outsourcing of security 29 / 41 Assurance games: Cold war arms race USSR refrain build USA refrain (4,4) (1,3) build (3,1) (2,2) Exercise: compute the equilibrium outcome (Nash or dominant strategy) 30 / 41

Assurance games in infosec: Cyber arms race Russia refrain build USA refrain (4,4) (1,3) build (3,1) (2,2) 31 / 41 Assurance games in infosec: Upgrading protocols Many security protocols (e.g., DNSSEC, BGPSEC) require widespread adoption to be useful upgrade don t upgrade upgrade (4,4) (1,3) don t upgrade (3,1) (2,2) 32 / 41 Battle of the sexes party home party (10, 5) (0, 0) home (0, 0) (5, 10) 33 / 41 Stag-hunt games and infosec: joint cybercrime defense Stag hunt stag hare stag (10, 10) (0, 7) hare (7, 0) (7, 7) Coordinating malware response join WG protect firm join WG (10, 10) (0, 7) protect firm (7, 0) (7, 7) 34 / 41

Chicken dare chicken dare (0, 0) (7, 2) chicken (2, 7) (5, 5) 35 / 41 Chicken in infosec: who pays for malware cleanup? ISPs Pay up Don t pay Gov Pay up (0, 0) ( 1, 1) Don t pay (1, 1) ( 2, 2) 36 / 41 How to coordinate (Varian, Intermediate Microeconomics) Goals of coordination game: force the other player to cooperate Assurance game: coordinate at an equilibrium that you both like Stag-hunt game: coordinate at an equilibrium that you both like Battle of the sexes: coordinate at an equilibrium that one of you likes Prisoner s dilemma: play something other than an equilibrium strategy Chicken: make a choice leading to your preferred outcome 37 / 41 How to coordinate (Varian, Intermediate Microeconomics) In assurance, stag-hunt, battle-of-the-sexes, and chicken, coordination can be achieved by one player moving first In prisoner s dilemma, that doesn t work? Why not? Instead, for prisoner s dilemma games one must use repetition or contracts. Robert Axelrod ran repeated game tournaments where he invited economists to submit strategies for prisoner s dilemma in repeated games Winning strategy? Tit-for-tat 38 / 41

Assurance games: Cyber arms race Russia refrain build USA refrain (4,4) (1,3) build (3,1) (2,2) 39 / 41 Russia proposed a cyberwar peace treaty 40 / 41 US Department of Homeland Security signals support for DNSSEC Source: https://www.dnssec-deployment.org/index.php/2011/11/dhs-wins-national-cybersecurity-award-for-dnssec-work/ 41 / 41