4. Game theory terminology Select the term that best describes each definition l

Question

4. Game theory terminology Select the term that best describes each definition listed in the following table. Tit-for- tat Prisoners Payoff Dilemma Nash Equilibrium Strategy Collusion Strategy Matrix Game Dominant Definition A case in which individually rational behavior leads to a jointly inefficient outcome A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents A player's best choice, if it exists, regardless of his or her opponent's strategy The event that occurs when agents in a game form an agreement about which strategies to implement

Explanation / Answer

1. Prisoner's dilemma is a case in which the two individuals/players act rationally but reach an outcome that is inefficient.

2. Nash equilibrium is the set of strategies for each player in which each player's strategy is the best option for that player... . No player has an incentive to deviate from this equilibrium.

3. Dominant strategy is the player's best choice regardless of what other player does.

4. Collusion occurs when both players agree upon which strategy to play.

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