Game Theory Flashcards
Pareto efficiency
An allocation that is not dominated by any other allocation.
What does it mean to say that the Pareto Criterion is cautious?
The Pareto criterion makes no value judgement beyond the least controversial one, that an allocation is better if it makes at least one person better off and no one worse off.
What is the name of the outcome of an economic interaction?
An allocation is a certain distribution among the players off goods or other things that they value.
Pareto criterion
According to the idea of the Pareto criterion, allocation A is better than allocation B if at least one party would be strictly better off with A than B, and no body would be worse off.
Pareto’s law
Across the ages with differing types of economies, there would be very few rich people and a lot of poor people.
80-20 rule that the richest 20% of a population typically held 80% of the wealth.
Social Dilemma
Occur when people do not take account of the effects of their actions on others, whether they happen to be positive or negative.
The tragedy of the commons
1968 Journal that stated that resources like the earth’s atmosphere or fish stocks, are easily overexploited unless we begin to control their access in some way. This is an example of a small scale social dilemma
Resources that are commonly owned tend to be overused, individuals act in their self-interest deplete shared resource
Free-riders
Someone who benefits from the contributions of others without actually contributing themselves.
Social interactions
Situations where the actions of an individuals affect another individuals outcomes.
Strategy
An action or action plan that a person may choose while being aware of the mutual dependence of their outcomes on their own and other’s actions.
Game Theory
A set of models of strategic interactions, where your outcome depends not just on your own choices, but also on the choices of others. Constrained optimisation by a single decision maker- strategic optimisation in a multi-player system.
Games
Must include-
1. Players
2. The feasible strategies
3. The order of play
4.The information
5. The pay-offs
Simultaneous game
A game where players make their decisions simultaneously, not knowing what the other has decided to do. (prisoner’s dilemma)
One shot game
Players in a game only interact once
Best Response
The strategy that will lead to a player’s most preferred outcome, given the strategies that the other players select.
