Important Stuff

Question 0

Qualifications for strategic games

Answer 0

Mutual awareness of cross effect. Unless there are two or more players, each of whom responds to what others do, or what they think the other might do, it is not a game.

Question 1

Two types of strategic games

Answer 1

Sequential moves and simultaneous moves

Question 2

How impersonal markets become strategic games

Answer 2

Mutual commitment or private information. When each participant is significant in the interaction, either because each is a large player to begin with of because commitments or private information narrow the scope so that each player is important in the relationship.

Question 3

Mutual commitment

Answer 3

When choosing one builder to renovate it becomes a strategic game for example. When the relationship becomes bilateral.

Question 4

Private information

Answer 4

Insurance company determining health of individual applicants.

Question 5

Constant sum game

Answer 5

Often substituted for a zero sum game. The idea is that the players’ interests are in complete conflict.

Question 6

One shot games

Answer 6

Actions are more likely to be unscrupulous or ruthless

Question 7

Classifying games

Answer 7

1) are the moves sequential or simultaneous?
2) are the players’ interests in total conflict or is there some commonality?
3) is the game played once or repeatedly, and with the same or changing opponents?
4) do the players have full or equal information?
5) are the rules fixed or manipulable?
6) are agreements to cooperate enforceable?

Question 8

Limitations on information

Answer 8

External uncertainty and strategic uncertainty

Question 9

External uncertainty

Answer 9

A player may be uncertain about external circumstances

Question 10

Strategic uncertainty

Answer 10

A player may be uncertain about exactly what moves the opponent has made in the past of is making at the time the player makes her move

Question 11

Perfect information

Answer 11

A game that doesn’t have external or strategic uncertainty

Question 12

Incomplete or asymmetric information

Answer 12

When one player knows more than another. In such situations players attempt to infer, conceal, or sometimes convey their private information.

Question 13

Good principle 1

Answer 13

You want to release your information selectively. You want to reveal the good information (the kind that will draw responses from the other players that work to your advantage) and conceal the bad (the kind that may work to your disadvantage)

Question 14

Signals- signaling

Answer 14

Opponents will not recognize your unsupported declarations about progress or capabilities. They can be convinced only by objective evidence or by actions that are credible proof of your information. Such actions on the part of the more informed player are called signals.

Question 15

Screening, screening devices

Answer 15

The less informed party can create situations in which the more informed player will have to take some action that credibly reveals his information.

Question 16

General principle 2

Answer 16

When different players have different information, the manipulation of information itself becomes a game, perhaps more important than the game itself

Question 17

Pre-game

Answer 17

The game that sets the agenda. Where the rules are made- strategic skills can be deployed at this point. Some players, such as Rockefeller, only participated in games where they could participate in making the rules.

Question 18

Cooperative agreement

Answer 18

Games in which joint-action agreements are enforceable

Question 19

Noncooperation agreements

Answer 19

Agreements in which enforcement is not possible and individual participants must be allowed to act in their own interests.

Question 20

Strategies

Answer 20

The complete plan of action. The choices available to the players. Each player must make a complete plan of action whether the game is sequential or simultaneous.

Question 21

Payoff

Answer 21

The number associated with each possible outcome. 1) the payoffs for one player capture everything in the outcomes of the game that the player cares about. The player need not be selfish, but the player need not be selfish, but concern for others is factored in the payoff. 2) we will suppose that, if the player faces a random prospect of outcomes, then the number associated with this prospect is the average of the payoffs associated with each component outcome, each weighed by its probability

Question 22

Expected payoff

Answer 22

Probability that an outcome happen. Multiplying and adding.

Question 23

Rational behavior

Answer 23

Assumes that players are perfect calculators and flawless followers of their best strategies. Has two essential ingredients: complete knowledge of ones own interests and flawless calculation if what actions will best serve those interests.

Question 24

Rules of the game

Answer 24

1) the list of players, 2) the strategies available to each player, 3) the payoffs if each player for all possible combinations of strategies pursued by all the players, and 4) the assumption that each player is a rational maximizer

Question 25

Equilibrium

Answer 25

Each player is using the strategy that is the best response to the strategies if the other players.

Question 26

Evolutionary approach

Answer 26

A dynamic process in which strategies that proved to be better in previous plays of the game are more likely to be chosen in later plays. Some players come to the game with a particular strategy hard wired or programmed in. In many games the evolutionary stable limit is the same as the equilibrium that would result if the players were consciously rational calculators. Therefore the evolutionary approach gives us a Blackfoot justification for equilibrium analysis.

Question 27

The uses of game theory

Answer 27

1) explanation- answer what did it happen?
2) prediction- use it to see what actions they will take and what outcomes will result.
3) advice/prescription- figure out which strategies are likely to yield good results and which are bad.

Question 28

Rollback/backward induction

Answer 28

The method of looking ahead and reasoning back to determine behavior in sequential-move games. Requires starting to think about what will happen at all terminal nodes and literally “rolling back” through the tree to the initial node.

Question 29

Rollback equilibrium

Answer 29

The outcome that arises from when all players choose their optimal strategies found by doing rollback analysis.

Question 30

Optimal strategy

Answer 30

Complete plan of arguing for each player. Must specify the players best choices at each node where the rules of the game specify that she moves, even though many of these nodes will never be reached in the path of play.

Question 31

Second-mover advantage

Answer 31

Comes from the flexibility to adapt oneself to the others’ choices. Whether commitment or flexibility is more important in a specific game depends on its particular configuration of strategies and payoffs.

Question 32

Intermediate valuation function

Answer 32

A rule that gives you an indirect way of assigning plausible payoffs to nonterminal nodes, because you are not able to explicitly roll back from a full look-ahead. The typical method assigns values to each piece and to positional and combinational advantages that can arise during play. The sum if all the numerical values attached to pieces and their combinations in a position is the intermediate value of that position.