Chapter 6: GAME THEORY Flashcards
The language of strategic interactions; it deals with situations in which our well-being depends on the choices made by others, and in which our choices affect the well being of others
game theory
An event in which participants submit bids for one or more items; the individual or group holding the event establishes rules to determine the winner (or winners) and cost of the item using the bids
auction
A set of individuals making choices that affect each other’s well being; can be people, firms, countries, etc.
players
An array of selected strategies, one for each player
strategy profile
How much each player will receive as a payoff given the strategies chosen; need not be monetary, they reflect preference over outcomes
payoff profile
In game theory, the results received by a player
payoff
A diagram that shows the payoffs of a game; one player and their strategies is represented using rows, and the other using columns
payoff matrix
A strategy that gives the highest payoff
best response
Cases in which the best response for a player is the same no matter what other players choose
dominant strategy
Cases in which there is only one strategy that is the best response
strictly dominant strategy
Cases in which all players have a dominant strategy
dominant strategy equilibrium
Cases in which the payoff is at least as high as other strategies
weakly dominant strategy
When each strategy is a best response to the other(s)
nash equilibrium
In games of sequence, a complex object which must specify the move to be made in every contingency that might arise
strategy
A threat that a rational player would actually not carry out, because it would not be in his best interest to do so; also known as a non-credible threat
empty threat
