Week 6 Flashcards
What is a social dilema?
These occur when people do not take adequate account of the effects of their actions on others, whether these are positive or negative.
What are social interactions?
Situations in which there are two or moer people, and the actions taken by each person affect both their own outcome and other people’s outcomes.
What is a strategic interaction?
When people engaged in social interaction are aware of the ways their actions affect others
What is game theory?
A set of models of strategic interactions.
What is a market glut?
A low price in the market
What is a ‘simultaneous game’?
Players make their decisions at the same time, not knowing what the other person has decided to do
In a payoff matrix cell, what does the bottom left and top right number represent?
1st (bottom left) = Payoff for row player
2nd (top right) = Payoff for column player
What is an equilibrium in a game?
The overlapping strategy that both players would chose once all responses have been tested.
I.E in this scenario, neither player would chose to produce the other good.
What is a Nash equilibirum?
A strategy or set of strategies in which each player plays a best response in the scenario.
How do we write a strategy in shorthand?
(x,y)
x = good produced by row player
y = good produced by column player
Why are some payoff matric games referred to as ‘Invisible Hand Games?’
Because e=they reflect Adam Smith’s theory that simple market forces can lead players acting in self-interest to a production decision that is in their best interest, without any communication between them.
How do you talk through the payoff matrix?
If A chooses to do this, then B is better off doing…
What is a ‘dominant strategy’?
When one player choses the same strategy no matter what their opponent chooses
What is a ‘dominant strategy equilibrium?’
When the nash equilibrium is the dominant trat for both players
What is the ‘Prisoners Dilema’?
A situation in a PayOff matrix where both players will chose a less beneficial outcome due to self-interest despite their being a greater payout equilibrium that could be attained via collusion
What does the term ‘allocation’ refer to?
the outcome of an economic interaction
What is the ‘Pareto criterion’?
That allocation A is better than allocation B if at least one party would be better off with A than B, and nobody would be worse off.
‘A Pareto dominates B’
What is Pareto’s law?
That the richest 20% of the population typically holds 80% of the wealth
What quality must an allocation have for it to be pareto efficient>
It is not pareto-dominated by any other allocation
I.E there is no alternate allocation where one party would be better off with no other parties being worse off
What is a Public Good Game?
When one individual bears a cost to provide a good, everyone receives a benefit
-> leads to the free-rider problem
What is the difference between Common Property and Open-access resources?
Common Property = Well=defined community of users who can in practise prevent outsiders from expliting their resource
Open-access = Oceans fisheries etc..
Define Altruism
A social preference in which an individual’s utility is increased by benefits to others
Define economic rent
The difference between the net benefit gained from an action, and the net benefit of the next best alternative
How do you calculate the expected pay-off in an ultimatum game?
(Probability of Acceptance) X (Pay off if accepted)
What is a coordination game?
When each player would like to ensure their action coordinates with their opponent’s action
In what circumstance would a pay-off matric game not be called an invisible hand game?
When the players MAY NOT REACH the outcome that is best for both of them.
When does a conflict of interest occur in a coordination game?
When players would prefer different Nash equilibria
What is a hawk-dove game?
A game in which players can act like an aggressive and selfish hawk or peaceful dove
