Unit 4 - Social Interactions

Question 1

What is a social dilemma?

Answer 1

A situation in which actions taken independently by individuals in pursuit of their own private objectives result in an outcome which is inferior to some other feasible outcome that could have occurred if people had acted together, rather than as individuals.

Question 2

What is a free ride?

Answer 2

Benefiting from the contributions of others to some cooperative project without contributing oneself.

Question 3

What is altruism?

Answer 3

The willingness to bear a cost in order to benefit somebody else.

Question 4

What is game theory?

Answer 4

A branch of mathematics that studies strategic interactions, meaning situations in which each actor knows that the benefits they receive depend on the actions taken by all.

Question 5

What is a strategic interaction?

Answer 5

A social interaction in which the participants are aware of the ways that their actions affect others (and the ways that the actions of others affect them).

Question 6

What is a strategy?

Answer 6

An action (or a course of action) that a person may take when that person is aware of the mutual dependence of the results for herself and for others. The outcomes depend not only on that person’s actions, but also on the actions of others.

Question 7

What is a game?

Answer 7

A model of strategic interaction that describes the players, the feasible strategies, the information that the players have, and their payoffs.

Question 8

What is division of labour?

Answer 8

The specialization of producers to carry out different tasks in the production process.

Question 9

What are players?

Answer 9

Who is interacting with whom

Question 10

What are feasible strategies?

Answer 10

Which actions are open to the players

Question 11

What is the information (game)?

Answer 11

What each player knows when making their decision

Question 12

What is a payoff?

Answer 12

The benefit to each player associated with the joint actions of all the players.

Question 13

What is the best response?

Answer 13

In game theory, the strategy that will give a player the highest payoff, given the strategies that the other players select.

Question 14

What is a dominant strategy?

Answer 14

Action that yields the highest payoff for a player, no matter what the other players do.

Question 15

What is the dominant strategy equilibrium?

Answer 15

An outcome of a game in which every player plays his or her dominant strategy.

Question 16

What is reciprocity?

Answer 16

A preference to be kind or to help others who are kind and helpful, and to withhold help and kindness from people who are not helpful or kind.

Question 17

What is the prisoners’ dilemma?

Answer 17

A game in which the payoffs in the dominant strategy equilibrium are lower for each player, and also lower in total, than if neither player played the dominant strategy.

Question 18

What are social preferences?

Answer 18

Preferences that place a value on what happens to other people, even if it results in lower payoffs for the individual.

Question 19

What is a zero sum game?

Answer 19

A game in which the payoff gains and losses of the individuals sum to zero, for all combinations of strategies they might pursue.

Question 20

What is a public good?

Answer 20

A good for which use by one person does not reduce its availability to others.

Question 21

What is a social norm?

Answer 21

An understanding that is common to most members of a society about what people should do in a given situation when their actions affect others.

Question 22

What is a revealed preference?

Answer 22

A way of studying preferences by reverse engineering the motives of an individual (her preferences) from observations about her or his actions.

Question 23

What is crowding out?

Answer 23

There are two quite distinct uses of the term.
One is the observed negative effect when economic incentives displace people’s ethical or other-regarding motivations. In studies of individual behaviour, incentives may have a crowding out effect on social preferences.
A second use of the term is to refer to the effect of an increase in government spending in reducing private spending, as would be expected for example in an economy working at full capacity utilization, or when a fiscal expansion is associated with a rise in the interest rate.

Question 24

What is cooperation?

Answer 24

Participating in a common project that is intended to produce mutual benefits.

Question 25

What is fairness?

Answer 25

A way to evaluate an allocation based on one’s conception of justice.

Question 26

What is inequality aversion?

Answer 26

A dislike of outcomes in which some individuals receive more than others.

Question 27

What is a sequential game?

Answer 27

A game in which all players do not choose their strategies at the same time, and players that choose later can see the strategies already chosen by the other players, for example the ultimatum game.

Question 28

What is a simultaneous game?

Answer 28

A game in which players choose strategies simultaneously, for example the prisoners’ dilemma.

Question 29

What is a minimum acceptable offer?

Answer 29

In the ultimatum game, the smallest offer by the Proposer that will not be rejected by the Responder. Generally applied in bargaining situations to mean the least favourable offer that would be accepted.

Question 30

What is a Nash equilibrium?

Answer 30

A set of strategies, one for each player in the game, such that each player’s strategy is a best response to the strategies chosen by everyone else.