Game theory Flashcards Preview

EC2001 - Intermediate Microeconomics > Game theory > Flashcards

Flashcards in Game theory Deck (9)
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1

What is strictly dominant strategy

a strategy that guarantees a strictly higher payoff than any other strategy, independently of what the other player is doing

2

What is Pareto efficiency

the competitive market determines a Pareto efficient amount of output b/c at q* the price that someone willing to pay to buy an extra unit of the good is equal to the price that someone must be paid to sell an extra unit of the good

it is impossible to make one agent better off without making the other agent worse off

3

What is the strictly dominated strategy

a strategy is strictly dominated if there exists another strategy, that guarantees a strictly higher payoff, independently of what the other player is playing

4

What is best response

a strategy that guarantees the highest payoff given the strategy played by the other player

5

What is Nash equilibrium

a profile of strategies for all the players, such that the strategy played by the players guarantees the highest payoff, given what the other players are doing

6

What is the formal definition of Nash equilibrium

a nash equilibrium is a profile of strategies (s1*, s2*) such that"

u1 (s1*, s2*) ≥ u2 (s1*, s2*) for all s1 ≠ s1*

u2 (s1*, s2*) ≥ us (s1*, s2*) for all s2 ≠ s2*

7

What is mixed strategy

it specifies the probability with which a player will play each of the (pure strategies)

8

What is Nash Theorem

A NE in mixed strategies always exists

9

What is the game of entry deterrence

in the interest of the firms in the industry to try to prevent such entry