Lecture 2

Question 1

what are the components of a game?

Answer 1

players
payoffs
information
order of play
strategy sets
strategy profiles

Question 2

non-cooperative game = ?

Answer 2

no binding agreement, each player acts individually, uncoordinated

Question 3

cooperative game = ?

Answer 3

binding agreement where both agree upon an outcome, usually a pareto efficient one

Question 4

solution concept = ?

Answer 4

a statement about how players will behave in the game

can be a basis for predicting the outcome (e.g., nash equilibrium)

Question 5

best response = ?

Answer 5

a strategy that results in the highest payoff given the strategy of the other player

Question 6

nash equilibrium = ?

Answer 6

the safe option

an agreement regardless of laws in both parties’ best interests to avoid the worst payoff

mutual best response

Question 7

consequences of uncoordinated behaviour = ?

Answer 7

underuse/overuse of resources

Question 8

prisoner’s dilemma = ?

Answer 8

a coordination problem where both player’s can’t form a binding agreement and end up choosing what’s best for them

Question 9

dominant strategy = ?

Answer 9

a player’s best response to all possible strategy profiles of opponents

Question 10

dominant strategy equilibrium = ?

Answer 10

a game in which both players are adopting their dominant strategy

dominant strategy being their best response to all possible strategies of their opponents

Question 11

what are the ways of predicting game outcomes?

Answer 11

best responses
dominant strategies

Question 12

what are the ways of evaluation game outcomes?

Answer 12

pareto efficiency, pareto inefficiency, pareto superiority