Game Theory and Strategic Choices

These flashcards cover important concepts related to Game Theory, including definitions and strategic interactions that can arise in the context of decision making.

Game Theory

The science of making good decisions in situations involving strategic interaction.

Strategic Interaction

When your best choice depends on what others choose, and their best choice may depend on what you choose.

Payoff Table

A table that lists a player's choices in each row and the other player's choices in each column, showing all possible outcomes and payoffs.

Nash Equilibrium

An equilibrium in which the choice that each player makes is a best response to the choices that other players are making.

Prisoner’s Dilemma

A scenario in which two individuals face a dilemma of whether to cooperate or defect, revealing the challenges of achieving mutual cooperation.

Focal Point

A cue from outside a game that helps players coordinate on a specific equilibrium.

Grim Trigger Strategy

A strategy in indefinitely repeated games where the player cooperates until the other player defects, then defects forever.

First-Mover Advantage

The strategic gain of the player who makes the first move, allowing them to set the terms of the interaction.

Second-Mover Advantage

The strategic advantage of the player who can adapt their actions based on the first mover's choice.

Collusion

An agreement by rivals to not compete, instead coordinating to charge high prices.

Repeated Games

Games where players interact multiple times, which impacts their strategies based on previous moves.

Indefinitely Repeated Games

Games in which players face the same interaction an unknown number of times, allowing for strategies like cooperation.

Coordination Games

Games where players have a common interest in coordinating their choices.

Anti-coordination Games

Games where players seek to make different choices than their rivals for a better payoff.

Multiple Equilibria

Situations in games where there is more than one equilibrium, making coordination difficult.