Chapter 10 Game Theory

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Principle: Play your dominant strategy

Check to see if you have a dominant strategy. If you have one, play it!

sequential-move game

Game in which one player makes a move after observing the other player's move.

Nash equilibrium

A condition describing a set of strategies in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies; a situation where every player is doing the best he or she can given what other players are doing

normal-form game

A representation of a game indicating the players, their possible strategies, and the payoffs resulting from alternative strategies.

Secure strategy

A strategy that guarantees the highest payoff given the worst possible scenario. A situation where the player does NOT lose It does NOT take into account the decisions of your rival and may prevent you from earning a higher payoff

trigger strategy

A strategy that is contingent on the past play of a game and in which some particular past action "triggers" a different action by a player.

dominant strategy

A strategy that results in the highest payoff to a player regardless of the opponent's action.

mixed (randomized) strategy

A strategy whereby a player randomizes over two or more available actions in order to keep rivals from being able to predict his or her action.

Principle: Sustaining Cooperative Outcomes with Trigger Strategies

Cooperate provided no player has ever cheated in the past. If any player cheats, 'punish' the player by choosing the one-shot Nash Equilibrium strategy forever after

simultaneous-move game

Game in which each player makes decisions without knowledge of the other players' decisions.

Principle: Put yourself in your rival's shoes

If you do not have a dominant strategy, look at the game from your rival's perspective. `if your rival has a dominant strategy, anticipate that he or she will play it

What should a player do in the absence of a dominant strategy?

Play a secure strategy


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