Game theory Flashcards

1
Q

Strategy

A

Complete set of actions for each player

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2
Q

Pure strategy

A

Strategy in which it is a player’s best response to take the same action regardless of others actions

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3
Q

Strategy profile

A

A strategy for every player in a game

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4
Q

Nash equilibrium

A

Set of strategies (one for each player) such that each player’s strategy is a best response to the strategies of other players Leads to equilibrium outcome Hence no-one wants to change their strategy

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5
Q

Bertrand

A

Price setting (think BP) -COnsumers buy from lowest priced firm -Will continue to undercut each other until MC

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6
Q

Cournout

A

Quantity setting -Takes other firms output as given -Calculate BR curve -Solve simultaneously for equilibrium

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7
Q

Stakleberg

A

Sequential quantity setting -Firm 1 moves first -It is given that firm to responds with (cournot) BR curve -Hence firm 1 optomises with this (choosing best point on BR curve)

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8
Q

Subgame perfect Nash equilibria

A

Must constitute a Nash equilibria in every sub game

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9
Q

Finitely repeated games

A

If a stage game with a unique NE is played a fixed and finite number of times then simply repeat same unique subgame perfect equilibria.

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10
Q

Discount rate

A

for an interest rate r

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11
Q

When will a firm stick to collusion

A
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12
Q

Minmax punishment

A

The worst that one player can do to another given the other is responding optimally - individually rational if guarentees minmax payoff

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13
Q

Minmax payoff

A

When a player responds optimally to another player punishing them.

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14
Q

Folk theorem

A

Any feasible payoff pair which gives each player at least her minmax payoff can be supported as a Nash equilibrium of an infinitely repeated game if the discount factor is sufficiently close to 1 (the players are sufficiently patient)

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15
Q

Friedman’s alteration to Folk Theorem

A

Friedman 1971

Any feasible payoff pair which gives each player at least her minmax payoff can be supported as a sub-game perfect Nash equilibrium of an infinitely repeated game if the discount factor is sufficiently close to 1 (the players are sufficiently patient)

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16
Q

How to plot mixed strategy nash equilibria diagrams

A
  1. Plot pure nash equilibria
  2. Plot mixed strategy
  3. Draw x through mixed strategy
  4. Join up corners