ECN 100B Study Guide - Midterm Guide: Backward Induction, U96, Sequential Game
Document Summary
Game: any competition between players in which strategic behavior plays a major role. A game is described in terms of its players, its rules, outcome, payoffs, and the i(cid:374)fo(cid:396)(cid:373)atio(cid:374) the pla(cid:455)e(cid:396)s ha(cid:448)e a(cid:271)out the (cid:396)i(cid:448)als" (cid:373)o(cid:448)es. Action: move that a player makes at a specified stage of a game (i. e. how much output a firm produces in the current period) Strategy: battle plan that specifies the action that a player will make, conditional on the information available at each move and for any possible contingency. Pa(cid:455)offs: the pla(cid:455)e(cid:396)"s (cid:448)aluatio(cid:374) of the out(cid:272)o(cid:373)e of the game (i. e. profits for firms or utilities for individuals) Strategic behavior: set of actions a player takes to increase his or her payoff, taking into a(cid:272)(cid:272)ou(cid:374)t the othe(cid:396) pla(cid:455)e(cid:396)s" possi(cid:271)le a(cid:272)tio(cid:374)s. St(cid:396)ategi(cid:272) i(cid:374)te(cid:396)depe(cid:374)de(cid:374)(cid:272)e: a pla(cid:455)e(cid:396)"s opti(cid:373)al st(cid:396)ategy depends on the actions of others. We use game theory to study oligopolistic behavior but not competitive or monopolistic behavior.
