65: Game Theory Flashcards

1
Q

game theory

A

the study of behavior in situations of interdependence

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2
Q

payoff

A

reward received by a player in a game, such as profit earned by an oligopolist

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3
Q

prisoner’s dilema

A

1) each player has an incentive, regardless of the others actions, to cheat
2) if both cheat, they are worse off than if neither did

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4
Q

dominant strategy

A

the action that is best for one player regardless of the others actions

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5
Q

Nash equilibrium

A

the result when each player chooses the dominant strategy, or when each player chooses the option that maximizes profits given the action of the other

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6
Q

strategic behavior

A

when the firm attempts to influence the future behavior of other firms

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7
Q

tit for tat

A

a strategy of playing cooperatively at first, then doing whatever the other player did in the previous period, thereby rewarding cooperative behavior and punishing non-cooperative behavior

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8
Q

tacit collision

A

when firms expect to be competing for a long time, and thus conclude that behaving cooperatively is the most profit maximizing strategy (w/o formal collusion)

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