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Game Theory: Exam 1
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Key Concepts:
Terms in this set (10)
Rationality
each player prefers outcomes with higher payoffs
Dominant Strategy
a strategy x is dominant for a player if, for each permissible strategy configuration of the other players, X gives him a higher payoff than any of his other strategies
Dominated Strategy
a strategy X is dominated for a player if there is another strategy Y such that, for each permissible strategy configuration of the other players, Y gives him a higher payoff than X.
Never Best Response Strategy
a strategy is never a best response for a player if, for each list of strategies that the other players choose, some other strategy is this player's best response
Nash Equilibrium
1) No incentive to unilateral deviate from the Nash strategy
2) Strategies are mutual best responses
3) Ex-ante beliefs are correct ex-post
Focal Point
anything that can make beliefs converge (shared by both players)
ex: cultural norms
Sub-game
a game comprising a portion of a larger game, starting at a non-initial node of the larger game
Non-credible strategies
eliminated through sub-game perfect equilibrium
Sub-game perfect equilibrium
-Nash equilibrium strategies that are strategies in every sub-game
-Ensures credibility of all the strategies
Rationalizable
-Weaker (more general) than a Nash
-Optimal choice given some belief about what the other player would choose, provided this belief is formed recognizing that other players are making similar calculations and arming beliefs in the same way
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