Econ 12.1 12.2 12.3

The relationship between a pure strategy Nash equilibrium and a dominant strategy equilibrium is that

A dominant strategy equilibrium is a special case of a Nash equilibrium

An interaction between two or more persons is considered a strategic interaction when:

An individuals best choice may depend on what the others choose, the others best choice may depend on what the individual chooses

Step 1 in making good strategic decisions: consider all the possible outcomes

And every combination of choices you and the other player might make / construct a table that lists each you and the other players possible actions in separate rows then in the cells lost the payoffs of each player

Which of the following is NOT one of the four steps for making good strategic decisions

Assume that other will defer to your action

Step 2: think about "what ifs" separately"

Break the problem into it's simpler components which are the various choices the other person could make

Which of the following is an example of a coordination game?

Coordination with costumers Deciding whether to use the dame technology as other you are connected to Interpersonal relationships

Which of the following is NOT an example of a coordination game?

Deciding whether to grow tomatoes or flowers

When looking at a payoff table, what does it mean to "put up yourself in someone else's shoes"

Figure out what decision the other party is likely to make, given the other party's incentives

Step 3: play your best response

For each "what if" your goal is to play your best response, the choice that yields the highest possible payoff for your given the other players choices

Which statement is true of the prisoners deliemma?

In the prisoners deliemma, firms could do better if they both did exactly the opposite of what they ulitimetl choose to do

Game theory is a useful study strategic interactions as many decision are characterized by:

Interdependence

Apply the interdependence principle to focus on how your decisions are

Intertwined with those of others

Which is true of a payoff matrix

It takes into account all relevant costs and benefits associated with each action of the players

Equilibrium where there is no dominant strategy?

Nash equilibrium

Which of the following is true of a Nash equilibrium?

No player can improve their payoff by changing their strategy once in Nash equilibrium

A payoff table lists all possible ___ with a row for each ___ and a column for ___

Outcomes, of one players possible outcomes, each of the other players possible outcomes

A Nash equilibrium is

Reached when each player chooses the best strategy for himself, given other strategies chosen by the other players in the group

A dominant strategy ___

Results in a higher irrespective of the strategy chose by the other player

Nash equilibrium

Set of strategies in which no players has an incentive to change / it is the best response to their other persons best response

In game theory, a dominant strategy

The best strategy to pick, no matter which moves are chosen by the other player

A Nash equilibrium is an equilibrium in which:

The choice that each player makes is a best response to the choices others players are making

Game theory

The study of decision making when your outcomes are driven by the actions of others

Multiple equilibrium exist when

There is more than one equilibrium

Making good decisions requires you to anticipate

What others do

Strategic interactions

When your besg choice may depend on what others choosem and their best choice may depend on what you choose

Step 4: put yourself in someone else's shoes

You cannot figure out your best choice with first trying out the choices that others will make / by putting yourself in someone else's shows to figure out what decision you would make if you were faced with their incentives you realize they are also strategically thinking and you will find it easier to predict their choices