14 terms

Game Theory

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
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)
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.
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)