UBC ECON 101 - Game Theory and Strategic Decisions

These flashcards cover essential terms and concepts from the lecture on Game Theory and Strategic Decisions, crucial for understanding strategic interactions in economics.

Game Theory

The science of making good decisions involving strategic interaction.

Strategic Interaction

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

Nash Equilibrium

A pair of choices where each player is playing their best response.

Cooperation

When both players work together to achieve a better outcome.

Defection

When one player chooses to act in their own interest at the expense of the other.

Dominant Strategy

A choice that gives you a higher payoff than any other option, regardless of what the other player does.

Dominated Strategy

A choice that always results in a lower payoff compared to some other option, no matter what the other player does.

Prisoner’s Dilemma

A scenario where two individuals may not cooperate even if it appears that it is in their best interest to do so.

First-Mover Advantage

The advantage gained by being the first to make a choice in a strategic situation.

Second-Mover Advantage

The advantage gained by being able to adapt to the first mover's choice.

Coordination Games

Games where players benefit from matching choices.

Anti-Coordination Games

Games where players benefit from choosing different actions than their opponents.

Best Response

The choice that gives you the highest payoff given what the other player is doing.

Payoff Table

A table that describes the payoffs for each player given different combinations of strategies.

Multiple Equilibria

Situations with more than one equilibrium outcome, making coordination challenging.

Backward Induction

A method of reasoning that starts from the final decision and works backward to determine optimal choices.

Focal Points

Standards or norms that help individuals coordinate their choices in strategic situations.