Game Theory Flashcards
assumption about players
assumed to be rational actors: ordered/complete/transitive preferences. Players maximize according to their preferences.
unitary actor assumption
states with a single set of preferences
utilities
units of value realized by players at outcomes (situations the players’ decisions lead to)
strategies:
series of choices players follow in games (more complicated = more strats.)
Nash Equilibria Solution concepts
best response
normal form/ extensive form games:
matrix v. tree representation style (should allow us to anticipate what players will do)
game of chicken
i.e. reduce nuclear armaments or dire scenario pollution
cooperation game
climate change, need some sort of commitment mechanism
extensive form games
permits more complicated actions, represents sequences and info constraints (i.e. 2 players deciding to demand/not then force/not then resist/not) can include crisis/conflict subgame)
war started by your side
is better than war started by their side
apology game
both issuing apologies, worst outcome is neither issuing apologies
hero game
leader unselfishly takes cost/ supplies reward to other player (i.e. friendly fire)
prisoner’s dilemma
neither= bad individual benefits, long term losses (tit for tat) they would need to communicate with one another to cooperate. i.e. arms races, security dilemmas,
no nash equilibrium
a player with no payoff
assurance game
need institutional or other arrangements or else (there are these collective action failures)
Olson Logic
size proportions, (large= difficult to form), group composition problem (large members pay more, hetero = success more likely), institutional recommendations, smaller= less anonymity (easier to observe freeriding) and coordi. is easier to achieve
exploitation hypothesis
if they’re all the same they can’t benefit one another as much
private inducements/ selective incentives
complementary may reduce free-rider tendency, joint products, institutional structures. Cost sharing induces collective action
robert axelrod
situations are iterated/repeated= higher success for cooperation (tit for tat)
tit for tat
wins because can be provoked, not complicated, (never varies)nice, (never 1st to defect) forgives
private goods
food consumed, energy burned (yes)
inexhaustible
language, software (no)
common goods
fisheries, pastures, atmosphere (yes)
collective/public goods
IOs, peace & security, clean air, fresh water (no)
logic of collective action
since every member enjoys provided goods, incentive to freeride, (Olson)- could be underprovided or not at all
institutional recommendations
can be rewarded for contributing, i.e. NRA
homogenous groups
more likely to survive (put a higher value on a good)
priveleged actor
provides collective good for the rest of the group (ie. NATO)
environmental freeriding
montreal protocol(CFC regulation), Kyoto protocol (greenhouse gas), long-range transboundary air pollution agreement
tragedy of the commons
any commonly available resource will be overused b/c the benefits of overuse are private and costs are public i.e. pastures, fisheries, atmostphere (closure movement in britatin)
solutions to tragedy of the commons: moral persuasion
social pressure or public interest campaigns (not expected to save the commons) ie. blood donations
solutions to tragedy of the commons: privatization:
cost of it not being commons, can save commons
solutions to tragedy of the commons: coercive regulation
penalizes over-users to make cost of overuse private (creates disincentive)
examples of solved commons: whales
int’l whaling commission, not privatization, weak sheriff at best (norway and Japan pay other states for their quotas)
examples of solved commons Ozone:
montreal protocol (UV light, krill)
examples of solved commons int’l law of the sea
“exclusive economic zones” 200 nautical miles out to sea, seize vessels out harvesting (even fossil fuels)
ostrom’s rules for commons management
clearly defines boundaries and membership, rules have to make sense locally, members/those affected must be in on rule modification, monitors have to be members, graduated sanctions, no interference from above.
when threshold included all countries
nash equilibrium is the social optimum
free market assumptions
large # of small “buyers” small “sellers”, perfect mobility, perfect knowledge, homogenous product, unrestricted entry/exit
sources of market failure (noncontributers are externalities?)
externalities (unprices costs/benefits), non-competitive, pure public goods, commonly owned property rights incomplete info. market distortions (ie. tariffs or subsidies)
externalities
uncompensated interdependency among 2 or more agents (reg. transboundary pollution, flows of refugees from civil war, pos. state A eliminates a drug cartell that operated in multiple states.)
problem w/ externalities
too many negative and too few positive ones , positive ones aren’t rewarded, collective good characteristics
imperfect/assymetric info
one actor is better informed about interaction, prevents market from correctly pricing goods-
hidden action: imperfect/assymetric info
uninformed actor cannot observe actions of informed actor, moral hazard
hidden type:imperfect/assymetric info
uninformed doesn’t know informed actor’s type/preferences- adverse selection problems: only extremists (no moderate)
aggregation tech and public goods
agg. tech. indicates how individual contributions affect the overall level of public goodavailable for the group, usually assume a summation tech where add each others contribution (i.e. great lakes in US and Canada is prisoner’s dilemma, natural disasters chicken)
national good
us gov’t provides domestic infrastructure
regional public good
EU provides infrastructure, governance, environmental protection
global PG
UN provides peacekeeping missions, global governance, knowledge/tech sharing
national= favorable
state gov’ts have direct incentive, loans from developmental banks can be helpful
regional: moderately favorable
“new regionalism” many new IGOs that coord. group action, small group, iteration (ie. all island states)
trans-regional: challenging
high transaction costsacross regions due to distances, less iteration, larger group (more languages etc)
global: moderately favorable
strong IGOs that coord. higher prob of a privileged actor.
subsidiarity
promotes matching of IGOs jurisdiction w/ spillover range (doesn’t always include all affected by good, too little of good will provided.) no recipients are charged= inefficent
doesn’t usually work b/c of rainforests (carbon sequestriation, rainforest benefits)
irrational behavior
blood donation in US, voting in nat’l elections, volunteering for public causes, failing to exploit an exhaustible resource, recycling, tipping waiters on vacation
utility equations
risk averse, neutral and loving (coin flip for money or nothing for $4)
kahneman and Tversky’s Alternative prospect theory
losses vs. gains
ultimatum game
$10 to 2 players, p 1 picks, p2 accept/reject, worse than 70/30 was rejected.
