Game Theory

Question 1

Game

Answer 1

• A game is a formal representation of a situation in which a number of individuals interact in a setting of strategic interdependence

Question 2

• Elements of a game

Answer 2

o Players: who are involved?
o Rules: who moves when? What do they know? What can they do?
o Outcomes: for each possible set of actions by the players, what is the outcome of the game?
o Payoffs: what are the players’ preferences over the possible outcomes?

Question 3

o Games of Perfect and Imperfect Information

Answer 3

o Games of Perfect and Imperfect Information: Whether the player knows the actions previously taken by the opponent or not

Question 4

o Games of Complete and Incomplete Information:

Answer 4

o Games of Complete and Incomplete Information: Whether the player has complete information about his/her opponent’s type or not.

Question 5

Strategy

Answer 5

• A strategy is a complete contingent plan, that specifies how the player will act in every possible circumstance in which she/ he might be called upon to move (i.e., in each of her/his information sets).