Game theory

Question 1

Strategic intervention

Answer 1

Each player must make a decision whose output is dependant on the other player’s decision

Question 2

Types of non-cooperative games

Answer 2

Normal/strategic form games
Extensive form games
Bayesian games

Question 3

Normal/strategic form games

Answer 3

Decisions are made without the knowledge of the other parties decisions

Question 4

Extensive form game

Answer 4

Decisions are made sequentially

Question 5

Bayesian games

Question 6

Common knowledge

Answer 6

Information which each player has and each player knows each other’s has

Question 7

Assumptions of normal form games

Answer 7

Players are rational
Common knowledge exists

Question 8

Bi-matrix games

Answer 8

Contains only two players and a small number of discrete choices

Question 9

Iterated dominance

Answer 9

Games without a dominant strategy solution but outcomes can be eliminated via iteratively deleting strictly dominated strategies

Question 10

Nash equilibrium

Answer 10

A strategy combination is in a Nash equilibrium if no player has a better response to the others player’s strategy. No player has an incentive to deviate

Question 11

Mixed strategy Nash equilibrium

Answer 11

Randomising between two strategies will only be the best response if those two strategies yield the same expected utility