Eco - Chapter 9

A prisoner's dilemma is a game in which:

the players' payoffs are smaller when both play their dominant strategy compared to when both play a dominated strategy.

The _______ is a game in which the first player has the power to confront the second player with a take-it-or-leave-it offer.

ultimate bargaining game

When Tversky and Khaneman asked one group of people to imagine that, having previously purchased a ticket for $10, they arrive at the theater to discover they have lost their ticket and a second group to imagine that they arrive just before the performance to buy a ticket and find they have lost $10 from their wallets, the majority of people in the lost ticket group said they _____ still attend the performance, and the majority of people in the lost $10 group said they _____ still attend the performance.

would not, would

A dominant strategy exists if

a player has a strategy that yields the highest payoff regardless of the other player's choice.

Suppose the game above is repeated every day, and both firms adopt the following strategy: cooperate on the first day, then if the other firm cheats, cheat the next day, and if the other firm abides, abide the next day. This type of strategy is known as

a tit for tat strategy

The rule of thumb that estimates the frequency of an event by the ease with which it is possible to summon examples from memory is the

availability heuristic

A coalition of firms who agree to restrict output for the purpose of earning an economic profit is called a(n)

cartel

When players cannot achieve their goals because they are unable to make credible threats or promises, the situation is called a

commitment problem

In traditional economic models, the narrowly self-interested, well-informed, highly disciplined, and cognitively formidable decision maker is often referred to as

homo economicis

A ______ describes the possible moves in a game in sequence and lists the payoffs to each possible combination of moves.

decision tree

The tendency to experience losses as more painful than the pleasures that result from gains of the same magnitude is known as

loss aversion

The phenomenon that unusual events are likely to be followed by more nearly normal is known as

regression to the Mean

The rule of thumb according to which people are more likely to assume something belongs to a given category if it shares many characteristics with the stereotypical members of that category is the

representative heuristic