23 Game Theory Lecture Notes

These flashcards cover key vocabulary and concepts related to Game Theory as discussed in the lecture.

Game Theory

A model of strategic interaction among rational decision-makers.

Strategic Interaction

An interaction where the involved individuals’ best choices depend on other involved individuals’ choices.

Nash Equilibrium

The outcome when each player makes the best choice in light of the other player’s choice.

Prisoner’s Dilemma

A common type of game where two individuals must choose between cooperating or betraying one another, with outcomes affecting both.

Payoff Table

A way of organizing all the possible outcomes and payoffs of a strategic interaction.

Hold-up Problem

A situation where one party makes a relationship-specific investment that the other party could exploit or honor.

Coordination Games

Games with multiple equilibria where individuals face the challenge of achieving desired outcomes through cooperation.

Communication in Games

A means of guiding the game to a preferable outcome, important in achieving coordination.

Focal Point

A cue from outside the game that helps individuals achieve an equilibrium, such as social conventions or norms.

Economic Surplus

The difference between the total benefit received and the total cost incurred; can be lost in strategic interactions like the Prisoner's Dilemma.