Ch9 : Game Theory Flashcards
What is the assumption we must do in a game theory ?
Players are rational and act in their best interest, which is to choose their strategies to maximize their payoff
What is a nash equilibrium ?
It’s a situation where each player is playing his best response against the other players strategy
No single player is better off deviating unilaterally
What is a dominant strategy ?
It’s the strategy that yields to a higher payoff than any other strategy against all possible strategies chosen by other players
What is an efficient outcome ?
It’s when none of the firm could be better off
When players act in their own best interest, the result may not always be efficient
What is a sequential games ?
Players can change the nature of the strategic interaction by moving first
The first player (proposer) must anticipate the impact of his actions on the strategies available to other players (responder)
