Week 8 - Game Theory

Question 1

What are the two types of games?

Answer 1

Games can be non-cooperative or competitive.

Normal form: timing of moves and knowledge of players is not formally modeled.

Extensive form: is formally modeled.

Question 2

What is game theory?

Answer 2

Individuals recognise payoffs and behaviours are influenced by the decisions of others. Actions are interdependent.

Games consist of a set of players, set of recipes and a set of payoffs. All players decide simultaneously and don’t know the decision of others. No changes can be made afterwards.

Question 3

What is the dominant strategy?

Answer 3

A strategy is dominant if, regardless of what any other players do, the strategy earns a player a larger payoff than any other. Hence, a strategy is dominant if it is always better than any other strategy, for any profile of other players’ actions

Question 4

What is the nash equilibrium?

Answer 4

Strategy from which there is no incentive to change

Question 5

Pure strategy definition

Answer 5

A pure strategy defines a specific move or action that a player will follow in every possible attainable situation in a game. Such moves may not be random, or drawn from a distribution, as in the case of mixed strategies

Question 6

How do you determine equilibrium?

Answer 6

rule out the lowest payoffs in each row/column. Or go through each scenario individually