ECON-2006EG Study Guide - Quiz Guide: Externality, Subgame, Strategic Dominance
7 Mar 2021
School
Department
Course
Professor
Document Summary
Game theory: study of strategic interactions 1) agent optimises in an environment that also features interaction with other agents 2) analyses situations in which behaviour of economic actors jointly determine outcome: simultaneous move games. Strategies: compromise a complete plan describing how a player will act. Key elements of a game: 1) players 2) strategies 3) payoffs. Payoff matrix: represents payoffs for each action players take, one player"s actions in rows (+ first number listed in cell) & other player"s actions in columns (+ second number listed in cell) -> cells where action intersects give payoffs. Simultaneous move games: games in which players pick their actions at same time without knowing other person"s choice, but both players know entire payoff matrix = know payoff for both players. Example prisoners" dilemma: illustrates several important features: interactions among few players (here two), simultaneous move game, shows entire payoff matrix and excludes other influences that could change payoffs.
