1. What is a strategy? What is a strictly dominant strategy?
When thinking strategically, you should consider the following:
1) The what ifs
2) All possible outcomes
3) Evaluate your best response
4) Put yourself in someone else’s shoes
A dominant strategy is one where you should strictly do one thing no matter what your opponent
chooses.
In other words, it results in higher payoff irrespective of the strategy chosen by the other player.
If both parties have the same dominant strategy, then it will result in a dominant strategy
equilibrium.
This may not be the best choice that could occur through cooperation, but it still is the best
choice for the given situation.
This leads to the Prisoner’s Dillema.
2. What is a Nash equilibrium? How do you find it?
A Nash Equillibrium occurs when both parties do not have a dominant strategy; thus, both of
them essentially have a dominant strategy of not cooperating.
In other words, it is a set of strategies, one for each player, such that no player has an incentive
to change his or her strategy.
In order to find the Nash Equillibrium, you must look at one person’s best response to the other
person’s best response.
It is true that no player can improve their payoff by changing their strategy once in Nash
equilibrium
3. What is the difference between a simultaneous and a sequential game? How does
finding the equilibrium of the two differ?
A simultaneous move game occurs when players both move at the same time, whereas the
sequential game occurs when one player moves AFTER seeing what the first person did.
When finding the equilibrium for a sequential game, you should draw a game tree.
For each person, you should determine what their choices would be on each node.
Depending on what is the best choice for the other player, you should choose your outcome
based on what you would benefit with and what the last person would essentially lose more
from.
By doing so, you use BACKWARD INDUCTION.
If you get to move first, then you have what is called a first-mover advantage.
In simultaneous move games, this is not possible, as both people are moving at the same time.
When thinking strategically, you should consider the following:
1) The what ifs
2) All possible outcomes
3) Evaluate your best response
4) Put yourself in someone else’s shoes
A dominant strategy is one where you should strictly do one thing no matter what your opponent
chooses.
In other words, it results in higher payoff irrespective of the strategy chosen by the other player.
If both parties have the same dominant strategy, then it will result in a dominant strategy
equilibrium.
This may not be the best choice that could occur through cooperation, but it still is the best
choice for the given situation.
This leads to the Prisoner’s Dillema.
2. What is a Nash equilibrium? How do you find it?
A Nash Equillibrium occurs when both parties do not have a dominant strategy; thus, both of
them essentially have a dominant strategy of not cooperating.
In other words, it is a set of strategies, one for each player, such that no player has an incentive
to change his or her strategy.
In order to find the Nash Equillibrium, you must look at one person’s best response to the other
person’s best response.
It is true that no player can improve their payoff by changing their strategy once in Nash
equilibrium
3. What is the difference between a simultaneous and a sequential game? How does
finding the equilibrium of the two differ?
A simultaneous move game occurs when players both move at the same time, whereas the
sequential game occurs when one player moves AFTER seeing what the first person did.
When finding the equilibrium for a sequential game, you should draw a game tree.
For each person, you should determine what their choices would be on each node.
Depending on what is the best choice for the other player, you should choose your outcome
based on what you would benefit with and what the last person would essentially lose more
from.
By doing so, you use BACKWARD INDUCTION.
If you get to move first, then you have what is called a first-mover advantage.
In simultaneous move games, this is not possible, as both people are moving at the same time.
