Lecture 2: Society; Coordination Problems and Economic Institutions

Question 1

Solution concept

Answer 1

a rule for predicting the outcome of a game, how the game will be played

Question 2

Equilibrium

Answer 2

a state where there is nothing in the situation that will cause the state to change

Question 3

What idea is the Nash equilibrium based on

Answer 3

the idea that players choose best response strategies

Question 4

Best response strategy

Answer 4

a strategy that results in the highest payoff given strategies of all other players

Question 5

Nash equilibrium

Answer 5

a profile of strategies, each of which is the best response to strategies of other players, mutual best response

Question 6

Dominant strategy

Answer 6

a strategy is dominant if it is the players best response to all possible strategy profiles of other players

Question 7

Dominant strategy equilibrium

Answer 7

where all players adopt their dominant strategy

Question 8

What is the dominant strategy equilibrium the same as

Answer 8

Nash equilibrium

Question 9

Pareto efficient

Answer 9

an allocation where there are no other options in which one person would be better off and no one would be worse off

Question 10

Pareto superior

Answer 10

outcome A would be superior to outcome B if in A, one person is better off without anyone being worse off in B