This chapter explains the distinction between the concepts of “actions” and “policies,” along with the implications of this distinction. An action is defined as a possible move that is available to a player during a game, whereas a policy is a decision rule that a player uses to select actions, based on available information. In game theory, the word “strategy” is commonly inferred to be synonymous to policy. The chapter first illustrates the actions vs. policies distinction by considering a game in marketing known as the advertising campaign game. It then discusses the war of attrition game as an example of a multi-stage game and an open-loop game called zebra in the lake game before concluding with practice exercises related to the Nash equilibrium and a chicken game with alternate play, with their corresponding solutions.
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