Game Theory Flashcards
What key elements are there in game theory
Players, strategies and payoffs
What are dominant strategies in game theory
Strategies that are the best regardless of other players actions
What are dominated strategies in game theory
Never the best actions
How can you make it easier to solve the nash equalibrium
By knowing the dominant and dominated strategies
What are simultaneous move games
When players must choose their actions without knowing the oppositions choice
What is a maximin strategy
A strategy to minimize losses
How do outcomes differ in a one shot simultaneous game and a repeated simultaneous game
In multi stage game backward induction can be used
Cooperation is a valid equilibrium in the prisoners dilemma when a final stage is known
No
Cooperation in tue prisoners dilemma can be an equilibrium when the final stage is known or the game is infinite
Yes
Can backward induction be used in sequential games
Yes, when players take turnes
How are side payments strategically advantageous
Bribing your opponents or punishing yourself for hurting them can change the calculus of what is the most lucrative outcome for them or there perception of what is the most lucrative option for you
How can commitment be strategically advantageous
By making its threats more credible by for example making it costly to backtrack a firm can convince other players that they are better off taking the constellation price if a fight would make both worse off
What are the strategic benefits of entry deterence
If for example a monopoly creates excess capacity beforehand so that it could take any market entrant in a price war and make more profit than if it would simply let them enter and take the losses of preparation it adds credibility to the threat and the equilibrium is that they remain alone with all capacity to sell for whatever price
What is the strategic benefits of a reputation
It can work wonders as a deterrent
Why may players peruse a mixed strategy
If opponents are erratic or irational
