Game Theory

Game Theory

Study of strategic interactions among rational decision-makers.

Simultaneous Game

A game where players choose their actions simultaneously.

Dominant Strategy

A strategy that yields a higher payoff regardless of what the opponent does.

Nash Equilibrium

A situation where no player can benefit from changing their strategy while others keep theirs unchanged.

Players in Game Theory

The rational decision-makers involved in the strategic interaction.

Actions (Strategies)

Choices available to players in a game.

Payoffs

The outcomes or rewards received by players based on their chosen actions.

Self-Interest

The motivating factor that drives players to maximize their own payoff.

Normal Form Game

A representation of a game showing players, actions, and payoffs.

One Shot Game

A game played only once with players making decisions simultaneously.

Example of a Game

Competitive interactions such as GM vs. Ford.

Two Player Game

A game involving exactly two players.

Pareto Efficiency

An outcome where no player can be made better off without making another player worse off.

Prisoner's Dilemma

A situation where two players may either cooperate or defect, affecting both their outcomes.

Coordination Problem

A situation in which players struggle to reach a mutually beneficial outcome due to lack of communication.

Technology Coordination

Attempting to synchronize decisions in technology-related markets.

Nash Equilibria

Multiple outcomes where each player's strategy is optimal given the other player's choice.

Investment Decision

A strategic choice made to invest or not in potential opportunities.

Maximizing Payoffs

The goal of rational players in a game to achieve the highest possible reward.

Actions in Game Theory

The specific strategies chosen by players during the game.

Outcome of an Action

The result or payoff resulting from a player's choice of action.

Best Response Strategy

The best action a player can choose in response to an opponent's action.

High Production

A strategy option indicating a choice for high output levels in competitive scenarios.

Low Production

A strategy option indicating a choice for low output levels in competitive scenarios.

Implications of Nash Equilibrium

In a Nash equilibrium, each player's strategy is optimal given the strategies of others.

Unique Nash Equilibrium

A single solution in a game where players' strategies lead to stability.

Multiple Nash Equilibria

Situations where several stable outcomes can exist in a game.

Dominant Strategy Equilibrium

When all players choose their dominant strategy, leading to a Nash equilibrium.

Equilibria and Efficiency

Exploration of whether Nash equilibria result in the most efficient outcomes.

Payoff Matrix

A table that outlines payoffs for each player based on their actions.

Cops vs. Criminals

An example of strategic interactions highlighting competitive behavior.

Republicans vs. Democrats

A political example of strategic interaction between two parties.

Market Responses

Reactions of players in a market based on competitive actions.

Chess Players

A metaphor for strategic thinkers in a competitive environment.

Arms Race

A competitive situation where countries enhance military capabilities.

Best Outcome

The scenario that results in the highest overall benefit for all players.

Self-Interest in Game Theory

The assumption that players act in their own best interest to maximize payoffs.

High Capacity Production

A tactic where firms increase production levels to improve market share.

Low Capacity Production

A tactic where firms limit production levels to potentially increase prices.

Game Outcomes

Results that arise from the strategic decisions made by players.

Strategic Interaction

The situation where players' decisions affect each other.

Coalitional Games

Games in which players can form coalitions to improve their outcomes.

Externalities in Strategy

Effects of players' actions on outside parties that are not part of the game.

Sequential Games

Games where players make decisions in turns rather than simultaneously.

Independence of Preference

A concept where the choice of one player does not affect the other’s preferences.

Utility Maximization

Achieving the highest satisfaction or payoff from a decision.

Strategy Representation

How strategies are visually or mathematically represented in a game.

Market Competition

The rivalry between firms striving for market share and profitability.

Nature of Rationality

The assumption that players will make logical decisions to achieve their best interest.

Optimal Strategies

The best possible strategies a player can employ in a game.

Equilibria Analysis

The examination of the strategic behavior of players at a steady state.

Strategic Thinking

The discipline of planning and reasoning to achieve desired outcomes.

Risk and Payoff

Evaluating the potential return in relation to the risk taken.

Game Tracing

Following the sequence of moves in a game to identify strategies.

Competitive Advantage

An advantage gained by offering greater customer value.

Behavioral Game Theory

The study of strategic interactions considering psychological factors.

Information Asymmetry

A situation where one party has more or better information than the other.

Game Dynamics

The changes in strategy or behaviors among players over time in a game.

Crisis Management in Strategies

The strategic response to sudden and significant business threats.

Strategic Moves

Actions taken by players to influence others' decisions.

Historical Examples of Game Theory

Past scenarios where strategic planning and interactions played key roles.

Cooperative Games

Games where players can negotiate binding contracts to improve payoffs.

Dynamic Strategy

Strategies that evolve based on changes in the game environment.

Fixed Strategies

Unchanging strategies regardless of the opponent's actions.

Game Outcomes Measurement

Assessing the effectiveness and results of different strategies.

Simulation of Games

Using models to replicate and study game scenarios.

Zero-Sum Game

A situation where one player's gain is exactly balanced by the losses of others.

Evolutionary Game Theory

The study of strategic interactions where strategies evolve through natural selection.

Subgame Perfect Equilibrium

An extension of Nash equilibrium for sequential games ensuring optimal strategy.

Payoff Structure

How payoffs are arranged based on players' choices.

Game Theory Applications

Real-world situations where game theory concepts are applied to decision making.

Learning in Games

How players adapt strategies based on past experiences and interactions.

Strategic Leadership

Leading with a focus on long-term strategic outcomes.

Social Dilemmas in Games

Situations where individual rationality leads to collective irrationality.

Game Resolution Methods

Techniques used to determine the outcome of strategic interactions.

Feedback Loops in Strategy

The relationship between actions and reactions in a strategic context.

Market Signals

Indicators that influence players' strategies in competitive scenarios.

Value Creation

The process of generating worth from decisions and actions taken.