(2) Games - Nash EQ and other solution concepts

Question 1

Game - Definition

Answer 1

A game is a situation of strategic decision making.

Question 2

Assumptions in basic standard game theory

Answer 2

• Complete information (all outcomes and possible actions are known)
• Rationality
• Common knowledge of rationality

Question 3

Strategy - Definition

Answer 3

A strategy is a complete plan of actions.

Question 4

Nash Equilibrium - Definition

Answer 4

• Key principle: Mutual best responses
• Both players respond best given the response of the other player -> both players have no incentive to deviate from the outcome

Question 5

Equilibrium in dominant strategies

Answer 5

• Both player do the best no matter what the other player is doing
• Is always a Nash EQ but not the other way around

Question 6

Which other solution concept exists besides Nash EQ?

Answer 6

• Iterated elimination of weakly dominated strategies