Game theory terminologySelect the term that best describes each definition listed in the following table.DefinitionNash EquilibriumDominant StrategyCollusionTit-for-tat StrategyPayoff MatrixPrisoners' Dilemma GameA strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again The event that occurs when agents in a game form an agreement about which strategies to implement A player's best choice, if it exists, regardless of his or her opponent's strategy A case in which individually rational behavior leads to a jointly inefficient outcome

Dominant strategy refers to the situation where the person can maximize his benefit regardless of…

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Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5CQQ

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Game theory terminology

Select the term that best describes each definition listed in the following table.

Definition	Nash Equilibrium	Dominant Strategy	Collusion	Tit-for-tat Strategy	Payoff Matrix	Prisoners' Dilemma Game
A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again
The event that occurs when agents in a game form an agreement about which strategies to implement
A player's best choice, if it exists, regardless of his or her opponent's strategy
A case in which individually rational behavior leads to a jointly inefficient outcome

Definition Definition Economic decision-making framework that analyzes how different players optimize their outcomes with given pay-offs corresponding to their available strategies. The assumptions of game theory are: The number of players or competitors are finite/limited; All participants are rational The rules of the game are known to every player; and Each participant has a finite set of actions. A common way in which game theory is presented as an ( m x n ) matrix in which m represents the strategies of row player and n represents the strategies of column player. There are several limitations of game theory: Many businesses have a large number of competitors, and selecting an optimal strategy in these circumstances is difficult; Real-life business operating environments are full of uncertainty and difficult to model as a game theory; and The assumption of rationality and utility maximization isn't always an accurate portrayal of human nature.

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