Midterm 1 Flashcards
Pure Conflict
Also called zero-sum games or constant-sum games
- Payoffs sum to zero
- Ex. One football team wins (+1) the other loses (-1)
Non-Zero Sum Game
Players’ interest are not always in direct conflict
Ex. Trade, joint ventures (opp. for all to gain), or nuclear war (everyone loses)
Perfect Information
Players know what has happened every time a decision has to be made and they know the other player’s objective
Ex. Chess
Imperfect Information
Uncertainty about relavent external circumstances (i.e. the weather)
Asymmetric Information
One player knows more than the other does
Ex. Selling/buying a used car; dating
Screening
Strategy of the less informed player to elicit information from the more-informed player
Signaling
Strategy of the more informed player to convey his “good” information credibly to the less-informed
Strategy
A complete, contingent plan for a player in the game
-describes what he will do in every possible circumstance (even those that won’t be reached in actual play)
Strategy Set
The collection of all feasible strategies for that player
Decision Node
A point in the game at which someone has a decision to make.
Terminal node
An end point in a game tree, where the rules of the game allow no further moves, and payoffs for each player are realized
Rollback Equilibrium
The strategies for each player that remain after rollback analysis has been used to prune all the branches that can be pruned.
First-mover advantage
The ability to commit oneself to an advantageous position and to force the other players to adopt it.
Second-mover advantage
the flexibility to adapt oneself to the others’ choices.
Bargaining Game
A game in which two (or more) players
bargain over how to divide the gains from trade.
Disagreement Value (BATNA-Best alternative to negotiated agreement)
The value the players can expect to receive if negotiations break down
Hawk-Dove
a situation in which it is mutually beneficial for the players to play different strategies.
Nash Equilibrium
A configuration of strategies such that each player’s strategy is best for him, given those of the other players.
Dominance Solvability
when successive (iterated) elimination of dominated strategies leads to a unique outcome
Dominance Solvable Game
A game in which successive (iterated) elimination of dominated strategies leads to a unique outcome
Assurance Game
A game with two pure strategy nash equilibria–one that is risk dominant and one that is payoff dominant
A game where each player has two strategies say cooperate and not and it is best to cooperate if the other does too and not to cooperate if the other doesn’t. The best outcome for each player is when both cooperate.
Chicken Game
A game where each has two strategies swerve and straight so that both Straight, Swerve and Swerve, Straight are nash equilibria, each prefers the outcome where they go straight and the other swerves and the outcome where they both go straight is worst for both of them.
Extensive Form
Representation of a game by a game tree
Strategic Form
Representation of a game in a game matrix
Game Tree
Representation of a game in the form of nodes, branches, and terminal nodes and their associated payoffs
Equilibrium Path of Play
The path of play actually followed when players choose their rollback equilibrium strategies in a sequential game.
Intermediate Value Function
A rule assigning payoffs to nonterminal nodes in a game.
Bertrand Paradox
competition is incredibly intense even
though there are only 2 …rms.
Ultimatum Game
A form of bargaining where one player makes an offer of a particular split of the total available surplus, and the other has only the all-or-nothing choice of accepting the offer or letting the game end without disagreement, when both get zero surplus.
Information Set
A set of nodes among which a player is unable to distinguish when taking an action
Rollback
Analyzing the choices that rational players will make at all nodes of a game, starting at the terminal nodes and working backwards to the initial node.
