14 terms

Diane_YeomanTEACHER

Prisoner's Dilemma

Two person game that demonstrates how dominant strategies can lead to an inefficient Nash Equilibrium

Payoff Matrix

shows every outcome. includes: players, strategies (choices such as up/down), and payoffs

dominant strategy

strategy preferred by player regardless of opponents move

Nash equilibrium

A set of strategies, one for each player, where no player has an incentive to change his/her strategy. (No regrets) Not necessarily the best deal.

expected utilities in MSNE

weighted averages of each of the outcomes that occur in equilibrium

IESDS

Iterated Elimination of Strictly Dominated Strategies

Simplifies the game by removing strategies a player would never choose. (order doesn't matter when removing IESDS, and no Nash Equilibrium is removed)

Simplifies the game by removing strategies a player would never choose. (order doesn't matter when removing IESDS, and no Nash Equilibrium is removed)

Best response

Strategy(ies) that produce the greatest payoff depending on what other players choose.

simultaneous move games

players make decisions at same time (blind)

Backward induction

figure out what decisions led you to an outcome

Mixed strategy algorithm

derives mixed strategy Nash Equilibria by finding the particular mixed strategies that leave the other player indifferent between his/her two pure strategies

SPE subgame perfect equilibrium

A complete and contingent plan of action. States what all players would do at a particular decision node whether or not they actually reach that node in equilibrium.

Second price auctions

highest bidder wins but only has to pay whatever the second highest bidder put down

Backward Induction

Finds the subgame perfect equilibrium by starting at the end of the game, and uses that information to decide how players will behave at the beginning of the game.

IESWS

Iterated Elimination of Weakly Dominated Strategies

Simplifies the game by removing strategies a player would never choose. (order matters when removing IEWDS, and you might remove a Nash Equilibrium)

Simplifies the game by removing strategies a player would never choose. (order matters when removing IEWDS, and you might remove a Nash Equilibrium)