Game Theory Flashcards
What are the three problem games?
Tragedy of the commons, prisoners dilemma, and zero-sum game
Game theory: a players payoffs depends on…
The actions of others
Two types of games:
Simultaneous and extensive
Best strategy?
Put yourself in others’ shoes, choose a strategy of ‘what is the best response to the strategies of others in the game’
- we want the strategy with the greatest payoff
Dominant strategy?
Best response to every possible strategy of other players
How do you solve extensive form games?
Backwards induction - consider the last movers decision first!
Are players payoffs intertwined?
Yes
Nash equilibrium…
Combination of best responses
Can be more than one…
Mutual best responses
What is it called when all player’s choose a strategy that is the best response to the strategies of others?
Nash Equilibrium
Interesting Nash Equilibria point…
It helps us understand why trustworthy behavior is more likely to emerge when players have reputational concerns
