Game theory

Question 1

What do economists use game theory for?

Answer 1

Highlight strategies for maximising gains/minimising losses within restraints

Question 2

What is the nash equilibrium?

Answer 2

When no player can do better than their chosen strategy, given their beliefs of how other players will play

Question 3

What are two requirements for nash equilibrium?

Answer 3

• Each player must be playing a best response against a conjecture of how other players will play
• The conjecture must be correct

Question 4

What is dominant strategy in game theory?

Answer 4

Provides the best outcome regardless of other players strategy