Game theory Flashcards
What are sequential games?
When players move one after another
They are often analyzed with a game tree
How do you solve a sequential game?
Backwards induction
Start at the end and work backwards
What is a strategy?
Says what will you do at each decision node
What is the nash equilibrium?
Set of strategies, one for each player, such that no player can increase its playoff by unilaterally deviating to a different strategy
What is subgame perfect?
Rational choice at every decision node
What are simultaneous games?
Players must choose their strategies before observing any actions of other players
These games are analyzed with a game matrix
What are the factors that cause us to see collusion in some industries?
High likelihood of future games
Stable market conditions
Observable actions
Relatively few firms
