chapter 10- game theory

Question 1

what is a static game?

Answer 1

s a game where each player makes
a single decision, and these decisions are made
simultaneously

Question 2

what are the assumptions of a static game?

Answer 2

Players are rational and have complete knowledge of the
game’s structure and each other’s rationality
A finite number of pure strategies are available to players

Question 3

what is a dominant strategy?

Answer 3

A strictly dominant strategy is a strategy that yields the highest payoff for a player, regardless of what strategy the other player chooses

f all players have a strictly dominant strategy, we
predict a dominant-strategy equilibrium

At the dominant-strategy equilibrium, neither
player has an incentive to change its decision

Question 4

what Is a best response strategy?

Answer 4

If a player does not have a strictly dominant strategy,
then their best response depends on the other player’s
strategy, known as a best-response strategy.
* A best-response strategy is a player’s strategy that yields
the maximum payoff, given the other player’s strategy

NOT ALL BEST RESPONSE= STRICTLY DOMIANNT

Question 5

what is Nash equilibrium

Answer 5

is a best-response
strategy of a player to the strategies chosen by the other player.

• A static game with a pure strategy can have one or
  more Nash equilibria or no Nash equilibrium

Question 6

what is the main characteristic of nash eq

Answer 6

• The main characteristic of a Nash equilibrium is that it
  is mutually consistent. At the Nash equilibrium, no
  player has an incentive to change a different strategy.

Question 7

characeurtsics of a prisoners dilemma game

Answer 7

There is only one Nash equilibrium in the
game.
* The Nash equilibrium in a Prisoner’s dilemma
game is inefficient because there is another
outcome where both players could have
received a better off