Midterm 1

Question 1

Pure Conflict

Answer 1

Also called zero-sum games or constant-sum games

• Payoffs sum to zero
• Ex. One football team wins (+1) the other loses (-1)

Question 2

Non-Zero Sum Game

Answer 2

Players’ interest are not always in direct conflict

Ex. Trade, joint ventures (opp. for all to gain), or nuclear war (everyone loses)

Question 3

Perfect Information

Answer 3

Players know what has happened every time a decision has to be made and they know the other player’s objective
Ex. Chess

Question 4

Imperfect Information

Answer 4

Uncertainty about relavent external circumstances (i.e. the weather)

Question 5

Asymmetric Information

Answer 5

One player knows more than the other does

Ex. Selling/buying a used car; dating

Question 6

Screening

Answer 6

Strategy of the less informed player to elicit information from the more-informed player

Question 7

Signaling

Answer 7

Strategy of the more informed player to convey his “good” information credibly to the less-informed

Question 8

Strategy

Answer 8

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)

Question 9

Strategy Set

Answer 9

The collection of all feasible strategies for that player

Question 10

Decision Node

Answer 10

A point in the game at which someone has a decision to make.

Question 11

Terminal node

Answer 11

An end point in a game tree, where the rules of the game allow no further moves, and payoffs for each player are realized

Question 12

Rollback Equilibrium

Answer 12

The strategies for each player that remain after rollback analysis has been used to prune all the branches that can be pruned.

Question 13

First-mover advantage

Answer 13

The ability to commit oneself to an advantageous position and to force the other players to adopt it.

Question 14

Second-mover advantage

Answer 14

the flexibility to adapt oneself to the others’ choices.

Question 15

Bargaining Game

Answer 15

A game in which two (or more) players

bargain over how to divide the gains from trade.

Question 16

Disagreement Value (BATNA-Best alternative to negotiated agreement)

Answer 16

The value the players can expect to receive if negotiations break down

Question 17

Hawk-Dove

Answer 17

a situation in which it is mutually beneficial for the players to play different strategies.

Question 18

Nash Equilibrium

Answer 18

A configuration of strategies such that each player’s strategy is best for him, given those of the other players.

Question 19

Dominance Solvability

Answer 19

when successive (iterated) elimination of dominated strategies leads to a unique outcome

Question 20

Dominance Solvable Game

Answer 20

A game in which successive (iterated) elimination of dominated strategies leads to a unique outcome

Question 21

Assurance Game

Answer 21

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.

Question 22

Chicken Game

Answer 22

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.

Question 23

Extensive Form

Answer 23

Representation of a game by a game tree

Question 24

Strategic Form

Answer 24

Representation of a game in a game matrix

Question 25

Game Tree

Answer 25

Representation of a game in the form of nodes, branches, and terminal nodes and their associated payoffs

Question 26

Equilibrium Path of Play

Answer 26

The path of play actually followed when players choose their rollback equilibrium strategies in a sequential game.

Question 27

Intermediate Value Function

Answer 27

A rule assigning payoffs to nonterminal nodes in a game.

Question 28

Bertrand Paradox

Answer 28

competition is incredibly intense even

though there are only 2 …rms.

Question 29

Ultimatum Game

Answer 29

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.

Question 30

Information Set

Answer 30

A set of nodes among which a player is unable to distinguish when taking an action

Question 31

Rollback

Answer 31

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.