Chapter 10 Flashcards

1
Q

the decision problems that you face in real life have an:

A

interactive or strategic nature. This means that whatever happens depends not just on what you do but also on what other people do.

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2
Q

When are you said to be playing a game?

A

whenever you face a decision problem in which the final outcome depends not just on your action, and on whatever state of the world obtains, but also on the actions of at least one other agent.

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3
Q

The agents

involved in games are called

A

players.

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4
Q

What is a strategy?

A

is a complete plan of action that

describes what a player will do under all possible circumstances

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5
Q

how can we represent a game?

A

payoff matrix

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6
Q

payoff matrix

A

A payoff matrix is a table representing the payoffs of the players for each possible combination of strategies.

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7
Q

strategy profile

A

a vector of strategies, one for each player.

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8
Q

What is analytical game theory built around?

A

Nash equilibrium

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9
Q

Nash Equilibrium

A

A Nash equilibrium is a strategy profile such that each strategy in the profile is a best response to the other strategies in the profile.

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10
Q

pure coordination game

A

a game in which the players’ interests are perfectly aligned.

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11
Q

impure coordination game.

A

players benefit unequally from particular equilibrium

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12
Q

When is outcome X said to Pareto dominate another Y.

A

An outcome X is said to
Pareto dominate another Y if all players weakly prefer X to Y and at least one
player strictly prefers X to Y.

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13
Q

Pareto optimal

A

when Outcome it is not Pareto

dominated by any other outcome.

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14
Q

game theorists refer to non-binding verbal agreements as:

A

cheap talk.

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15
Q

How to find equilibrium of a repeated game?

A

we start at the end and use a

procedure called backward induction.

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16
Q

backward induction.

A

Backward induction is the process of reasoning backwards in time, from the end of a problem or situation, to determine a sequence of optimal actions.

17
Q

zero-sum game

A

a game in which whenever

one player wins, another player loses.

18
Q

mixed strategies.

A

an assignment of a probability to each pure strategy

19
Q

Nash’s theorem

A

Every finite game – that is, every game in

which all players have a finite number of pure strategies – has a Nash equilibrium.

20
Q

Trembling-hand-perfect equilibrium

A

A trembling-hand-
perfect equilibrium is a Nash equilibrium that remains a best response for each

player even when others have some minuscule probability of trembling, that is,
accidentally playing an out-of-equilibrium strategy.

21
Q

what are games with multiple stages called?

A

sequential game.

22
Q

To analyze sequential

games, it is often useful to use

A

use a tree-like representation called the extensive

form.

23
Q

What is a subgame of the original game

A

that part of the game which starts at the node where Player

II moves

24
Q

Subgame-perfect equilibrium

A

A subgame-perfect equi-

librium is a strategy profile that constitutes a Nash equilibrium in each subgame.