Week 4 key definitions

Question 1

Game

Answer 1

A model of strategic interaction that describes the players, the feasible strategies, the information that the players have, and their payoffs.

Question 2

Best response

Answer 2

In game theory, the strategy that will give a player the highest payoff, given the strategies that the other players select

Question 3

Dominant strategy equilibrium

Answer 3

An outcome of a game in which every player plays his or her dominant strategy.

Question 4

Social dilemma

Answer 4

A situation in which actions taken independently by individuals in pursuit of their own private objectives result in an outcome which is inferior to some other feasible outcome that could have occurred if people had acted together, rather than as individuals.

Question 5

Altruism

Answer 5

The willingness to bear a cost in order to benefit somebody else.

Question 6

Reciprocity

Answer 6

A preference to be kind or to help others who are kind and helpful, and to withhold help and kindness from people who are not helpful or kind.

Question 7

Inequality aversion

Answer 7

A dislike of outcomes in which some individuals receive more than others.

Question 8

Nash equilibrium

Answer 8

A set of strategies, one for each player in the game, such that each player’s strategy is a best response to the strategies chosen by everyone else

Question 9

Public good

Answer 9

A good for which use by one person does not reduce its availability to others.

Question 10

Prisoner’s dilemma.

Answer 10

A game in which the payoffs in the dominant strategy equilibrium are lower for each player, and also lower in total, than if neither player played the dominant strategy.