Payoff Matrices

Payoff Matrices are tools in Game Theory to represent the outcomes of players’ strategies in a tabular form.

Structure

For two players, a matrix shows payoffs as \((u_1, u_2)\), where rows are Player 1’s strategies and columns are Player 2’s.

Examples

In a pricing game: If both firms price high, (5, 5); if both low, (2, 2); if one high, one low, (1, 6) or (6, 1).

Analysis

Used to find Nash Equilibria by identifying cells where no player benefits from switching.