People in Business and Society: Game Theory & Culture Vocabulary

Flashcards covering key definitions from Game Theory, Hofstede's Cultural Dimensions, Communication, and Negotiation Models.

Organization

An entity in which people interact to reach economic goals, with a specific focus on for-profit business companies.

Society

A group of people who interact in such a way as to share a common culture, which may be based on ethnic, racial, gender, belief, value, or activity bonds.

Game Theory

The study and mathematical modeling of strategic environments involving several rational players whose choices and payoffs depend on the decisions of everyone in the game.

Culture (Hofstede)

The collective programming of the mind distinguishing the members of one group or category of people from others.

Power Distance Index (PDI)

A cultural dimension measuring the extent to which less powerful members of organizations and institutions accept and expect that power is distributed unequally, defined from below.

Uncertainty Avoidance Index (UAI)

A cultural dimension indicating the extent to which a culture programs its members to feel comfortable or uncomfortable in unstructured, novel, or ambiguous situations.

Individualism vs. Collectivism (IDV)

A societal cultural dimension measuring the degree to which people are integrated into groups, ranging from loose individual ties to strong, cohesive in-groups offering protection in exchange for loyalty.

Masculinity vs. Femininity (MAS)

A societal cultural dimension referring to the distribution of values between genders, contrasting assertive and competitive values (masculine) with modest and caring values (feminine).

Long-Term Orientation vs. Short-Term Orientation (LTO)

A cultural dimension contrasting future-oriented values like perseverance, thrift, and flexhumility with past or present-oriented values like respect for tradition, face-saving, and monumentalism.

Indulgence vs. Restraint (IND)

A cultural dimension contrasting societies that allow relatively free gratification of basic human desires to enjoy life with societies that control and regulate gratification through strict social norms.

Simultaneous Move Game

A game form where players make their decision choices at the same time or without knowledge of the other players' actions due to having the same decision deadline.

Sequential Move Game

A game form where players make choices sequentially in turns over time, allowing later movers to observe earlier actions before deciding.

Strategy

A complete plan of action that specifies what a player will do in every possible situation or decision node that could arise in a game.

Rule of Strategy 1

The fundamental rule for solving sequential move games: look forward and reason backward (backward induction).

Nash Equilibrium

A stable game outcome where no player wants to unilaterally deviate to another strategy, given the strategies chosen by all other players.

Subgame Perfect Nash Equilibrium

An equilibrium solution for sequential games defined by players' optimal strategy choices at every decision node in the game tree, both on and off the equilibrium path.

Equilibrium Path

The specific sequence of choices through a game tree that is actually executed when players play their subgame perfect equilibrium strategies.

Choices OFF the Equilibrium Path

The actions specified in players' complete equilibrium strategies for decision nodes that are not reached along the executed equilibrium path.

Counterfactual Thinking

The evaluation of hypothetical scenarios ("what would have happened otherwise") to explain why choices on the equilibrium path occur.

Cheap Talk

Non-binding, costless verbal communication (such as unbacked promises or threats) that does not directly alter payoffs or legally enforce commitment.

Commitment Device

A binding action or mechanism taken before a game is played that irrevocably commits a player to a specific plan of action or imposes high penalties for breaking resolve.

Ultimatum Game

A two-player sequential bargaining game where a proposer makes a single take-it-or-leave-it offer on how to divide a sum of money, and a responder accepts or rejects it.

BATNA

Acronym for "Best Alternative to a Negotiated Agreement," representing a party's best outside option if bargaining fails, which determines negotiation power and pie division.

Other-Regarding Preferences

Non-selfish motives in human decision making and bargaining, including generalized fairness, altruism, empathy, and aversion to guilt or shame.

Nonviolent Communication (NVC)

A communication model developed by Marshall Rosenberg focused on expressing needs and sensing others' needs empathetically, avoiding moralistic judgment or language of domination.

Conflict

A process that begins when one party perceives that another party has negatively affected, or is about to negatively affect, something the first party cares about.

Negotiation

A process in which two or more parties exchange goods or services and attempt to agree upon an exchange rate or terms.

Positional Bargaining

A distributive, win-lose negotiation strategy focused on slicing a fixed pie where parties take rigid positions rather than addressing underlying interests.

Principled Negotiation

An integrative, win-win negotiation model developed by Fisher & Ury that expands the pie by separating people from the problem, focusing on interests instead of positions, and using objective criteria.

Dignity Cultures

Cultural contexts rooted in individualism that follow a rational model of negotiation based on directness and objective criteria.

Face Cultures

Cultural contexts following a relational model of negotiation that prioritizes hierarchy, humility, group harmony, and preserving personal standing without confrontation.

Honor Cultures

Cultural contexts following an honor model of negotiation where personal moral integrity, reputation, and virtuous behavior are treated as indivisible from the task itself.

Strictly Dominant Strategy

An action that yields a strictly higher payoff to a player than any alternative action, regardless of the choices made by opponents.

Rule of Strategy 2

The game theory principle stating that if a player possesses a dominant strategy, they should play it.

Prisoner's Dilemma

A simultaneous game structure where individual rational pursuit of dominant strategies (defecting) leads to an outcome where both players receive lower payoffs than if both had cooperated.

Tit-for-Tat

A strategy for repeated Prisoner's Dilemma games where a player cooperates in the first period and subsequently mimics the opponent's previous move.

Tit-for-Two-Tats

A forgiving variation of Tit-for-Tat designed to prevent retaliatory cycles by requiring two consecutive defections from an opponent before responding with defection.

Rule of Strategy 4

The rule for solving simultaneous games by searching all cells of the payoff table for a pair of mutual best responses, which forms a Nash equilibrium.

Coordination Game

A simultaneous move game featuring multiple Nash equilibria where players achieve higher payoffs by aligning their choices on compatible actions.

Focal Point

A prominent solution (or Schelling point) upon which players naturally converge in coordination games due to shared social norms, culture, or expectations.

Battle of the Sexes

A coordination game with multiple pure Nash equilibria where both players prefer coordinating over mis-coordinating, but favor different coordinated outcomes.

Chicken Game

A game with two pure Nash equilibria where swerving yields a lower status payoff, maintaining course wins if the other swerves, and mutual non-swerving results in total disaster.

Zero-Sum Game

A game of pure conflict in which any payoff gain by one player is exactly equal to the payoff loss suffered by the opponent.

Mixed Strategy

A strategy in which a player randomizes across available pure strategies according to a specific probability distribution to keep opponents guessing.

Rule of Strategy 5

The strategy rule for zero-sum games stating that if revealing your action in advance is disadvantageous, you benefit by choosing at random from available pure strategies.