Game Theory Flashcards
What are the four key elements to a game model
Players
Actions
Payoffs
Information
Define player
An individual who makes a decision. Each player’s goal is to maximise his/her utility by choice of actions
Define action
An action by a player is a choice he/she can make - assuming the player is looking to maximise their utility
Define actual payoff
the utility a player receives after all other players have picked their strategies and the game has been played out
Define expected payoff
The expected utility a player receives as a function of the strategies chosen by himself. herself and the other players
Define information
The knowledge at a particular time of the variables in the game - available to a particular player. Not all players necessarily have the same knowledge at the same times, you can learn as you go
Define pseudoplayers
Also known as random players. These are natural actions that may occur. It is outside the suite of individuals playing a game that can influence the action the players choose to take ex: nature as a player or recession
Define strategy
A plan to choose an action based on the information available at a given time
Define outcome
The utility received by each player based on the strategies selected
Define equilibrium
An equilibrium is a set of strategies containing the best strategies for each player in the game
Define zero sum game
A game in which the sum of the payoffs of all the players is zero whatever strategies they choose - Win lose the game
Define variable sum game
a game that is not zero-sum
What are two methods of presenting game information visually
Outcome matrix or game tree
dominated strategy
A strategy that is strictly inferior to another strategy no matter the strategies of other players
Define dominant strategy
A strategy that is a player’s best response to any strategies of other players
Define weakly dominant strategy
A strategy that is at least as good as a player’s best response to any strategies of other players
Define weakly dominated strategy
A strategy which is sometimes worse by never better than another strategy, no matter the strategies of other players
Define iterated dominance
A strategy profile found by deleting a weakly dominated strategy set of one of the players, and continuing this process until only one strategy remains for each player
Define nash equilibirum
A strategy profile where no player has the incentive to deviate from his/her strategy given that the other players do not deviate
Define tragedy of the commons
Where resources are commonly available at no charge people are likely to overexploit them
