Part 1.1.1 The Rules of the Game; Basic Definitions

Question 1

Essential elements of a game:

Answer 1

1. Players
2. Actions
3. Information
4. Strategies
5. Payoffs
6. Outcomes
7. Equilibria

Question 2

Players

Answer 2

Players are the individuals who make decisions whose goal it is to maximize his utility by choice of actions. Pg 22.

Question 3

Nature

Answer 3

Nature is a non-player who takes random actions at specified points in the game with specified probabilities.

Question 4

Action or Move

Answer 4

An Action or Move is a choice made by a player.

Question 5

Action Set

Answer 5

an Action Set is the entire set of actions available to a player.

Question 6

Action Combination

Answer 6

An action combination is an ordered set of one action for each of the n players in the game.

Question 7

order of play

Answer 7

when actions are available to a player.

Question 8

strategy

Answer 8

is a rule that tells him which action to choose at each instant of the game, given information set.

Question 9

strategy set or strategy space

Answer 9

is the set of strategies available to the player.

Question 10

strategy combination

Answer 10

is an ordered set of one strategy for each of the n players in the game.

Question 11

payoff

Answer 11

the utility a player receives after all players and Nature have picked their strategies and the game has been played out; or the expected utility a player receives as a function of the strategies chosen by himself and the other players.

Question 12

outcome

Answer 12

is a set of interesting elements that the modeller picks from the values of actions, payoffs, and other variables after the game is played out.

Question 13

equilibrium

Answer 13

is a strategy combination consisting of a best strategy for each of the n payers in the game.

Question 14

equilibrium strategy

Answer 14

are the strategies players pick in trying to maximize thier individual payoffs, as distinct from the many possible strategy combinations by randomly choosing one strategy per player.

Question 15

equilibrium concept or solution concept

Answer 15

is a rule that defines an equilibrium based on the possible strategy combinations and the payoff functions.