Game Theory

Question 1

What are the four key elements to a game model

Answer 1

Players
Actions
Payoffs
Information

Question 2

Define player

Answer 2

An individual who makes a decision. Each player’s goal is to maximise his/her utility by choice of actions

Question 3

Define action

Answer 3

An action by a player is a choice he/she can make - assuming the player is looking to maximise their utility

Question 4

Define actual payoff

Answer 4

the utility a player receives after all other players have picked their strategies and the game has been played out

Question 5

Define expected payoff

Answer 5

The expected utility a player receives as a function of the strategies chosen by himself. herself and the other players

Question 6

Define information

Answer 6

The knowledge at a particular time of the variables in the game - available to a particular player. Not all players necessarily have the same knowledge at the same times, you can learn as you go

Question 7

Define pseudoplayers

Answer 7

Also known as random players. These are natural actions that may occur. It is outside the suite of individuals playing a game that can influence the action the players choose to take ex: nature as a player or recession

Question 8

Define strategy

Answer 8

A plan to choose an action based on the information available at a given time

Question 9

Define outcome

Answer 9

The utility received by each player based on the strategies selected

Question 10

Define equilibrium

Answer 10

An equilibrium is a set of strategies containing the best strategies for each player in the game

Question 11

Define zero sum game

Answer 11

A game in which the sum of the payoffs of all the players is zero whatever strategies they choose - Win lose the game

Question 12

Define variable sum game

Answer 12

a game that is not zero-sum

Question 13

What are two methods of presenting game information visually

Answer 13

Outcome matrix or game tree

Question 14

dominated strategy

Answer 14

A strategy that is strictly inferior to another strategy no matter the strategies of other players

Question 15

Define dominant strategy

Answer 15

A strategy that is a player’s best response to any strategies of other players

Question 16

Define weakly dominant strategy

Answer 16

A strategy that is at least as good as a player’s best response to any strategies of other players

Question 17

Define weakly dominated strategy

Answer 17

A strategy which is sometimes worse by never better than another strategy, no matter the strategies of other players

Question 18

Define iterated dominance

Answer 18

A strategy profile found by deleting a weakly dominated strategy set of one of the players, and continuing this process until only one strategy remains for each player

Question 19

Define nash equilibirum

Answer 19

A strategy profile where no player has the incentive to deviate from his/her strategy given that the other players do not deviate

Question 20

Define tragedy of the commons

Answer 20

Where resources are commonly available at no charge people are likely to overexploit them