Week 8 Flashcards
Strategic Games and Bargaining
1
Q
Game theory definition
A
branch of mathematics that studies strategic decision-making
2
Q
What are the three elements of a “game”?
A
- players
- moves/strategies
- payoffs
3
Q
Sequential-move games
A
- players take turns
- competitor is given opportunity to evaluate rival’s move before deciding how to proceed
- to analyse use ‘tree-form’ of a game
4
Q
A
4
Q
Entry ‘game’
A
Suppose potential entrant is deciding to enter into market with a firm they have 2 paths of action
- accommodate the entry or
- fight the entry
5
Q
Prisoners’ dilemma
A
- Type of simultaneous move game
- demonstrates why two individuals might not cooperate, even when it is in their best interest to do so.
6
Q
Nash equilibrium
A
- Everyone is making the best decision they can, considering what everyone else is doing.
- No one has an incentive to change their choice, because doing so wouldn’t make them better off.
7
Q
Two types of bargaining - strategic view
A
- analyses bargaining using tools of game theory
- can be viewed as either a simultaneous-move game or a sequential-move game
8
Q
Second type of bargaining - non-strategic view
A
acknowledges that real life negotiations don’t have fixed rules as formal games do
