Simultaneous games Flashcards
Game theory models the interaction of:
Agents
In game theory, agent’s decision making and payoffs are…
Interdependent
What type of market structure does game theory analyse?
Oligopolistic situations
In normal form games, the agents must choose their decisions…?
Simultaneously
What are the steps of normal form games?
Players select strategy, outcome arrives, payoffs given/received
What does a strategy describe?
A player’s choices in response to other players’ behaviour
How many times is a normal form game played?
Once (One shot)
What are the three assumptions of normal form games?
- Complete information
- Full rationality
- Common knowledge
Why do we want a unique prediction for what will happen in a game?
It is not useful to have more than one outcome
Rational players … … strictly dominated strategies
Don’t choose
What is the basic method for finding Nash Equilibria
Circle best payoffs for each option, find the best combination where both are circled
What is complete information?
The players all know the rules of the game and each other’s payoffs for all outcomes
What is full rationality?
Each player is willing to rationalise their own payoffs
What is common knowledge?
Each player knows that the other players know the rules, the payoffs and are fully rational
