week 8 Flashcards
what are non-strategic situations
perfect competition - firms are price takers and do not have to worry about the prices of their competitors
monopoly - no competitors to worry about
what is game theory
mathematical models to study strategic interactions
an interaction can be cooperative or competitive
tool to study competition and cooperation between decision makers
what are simultaneously played games
(normal form/strategic form)
games where the players have to choose their decisions or actions simultaneously
players choose a decision without knowing what the others are doing
what are sequentially played games
(extensive form)
moves are made one after the other
players can see clearly what moves have been taken so far before they make their own choice
what are the qualities of a game solution
outcome is stable - nobody has an incentive to move from an outcome
outcome is reached by rational thinking - players are assumed to think in a logical way to maximise their expected payoff
what is strict dominance strategy
their strategy gives them a lower payoff than any other strategy, regardless of what other players are doing
what is Nash equilibrium
a player can achieve the desired outcome by not deviating from their initial strategy
what is iterated dominance
a players strategy is dominated if there exists another strategy giving that player a higher payoff for all combinations of strategies by other players
what are one shot ganes
the interaction happens just once
what are repeated games
the interaction happens many times or periodically
can be finitely or infinitely repeated
what are the two strategies for infinitely repeated games
grim trigger and tit for tat
what is grim trigger
i will first cooperate
as soon as you defect i will defect for the remainder of the game
what is tit for tat
i will first cooperate, i will subsequently replicate your previous action
if you were previously cooperative i am, if you were not then i am not
what are behavioural games
may make decisions based on social preferences
