game-theory - Concepts

Explore concepts tagged with "game-theory"

Total concepts: 26

Concepts

Dollar Auction - A game theory thought experiment where players bid on a dollar bill but both the winner and second-highest bidder must pay, demonstrating how rational actors get trapped into escalating commitments.
Backward Induction - A reasoning method in sequential games where players think ahead to the final outcome and work backwards to determine optimal strategy at each decision point.
Signaling - Actions taken primarily to communicate information about oneself to others rather than for their direct practical value.
Pareto Efficiency - A state of resource allocation where no individual can be made better off without making at least one other individual worse off.
Adverse Selection - A market situation where information asymmetry causes the wrong type of participants to be disproportionately attracted to a transaction, degrading market quality.
Winner's Curse - The tendency for the winning bid in a competitive auction or negotiation to exceed the true value of the item, resulting in a net loss for the 'winner'.
Countersignaling - Deliberately avoiding or downplaying signals to demonstrate that one doesn't need them.
Dominant Strategy - A strategy in game theory that yields a better outcome for a player regardless of what other players choose to do.
Cheap Talk - Communication that costs nothing to produce and carries no commitment, making it unreliable as a signal of true intent.
Infinite Games - Games played with the purpose of continuing play rather than winning.
Zero-Sum Game - A situation where one participant's gain is exactly balanced by another's loss, resulting in a fixed total payoff.
Negative-Sum Game - A situation where the total losses exceed the total gains, leaving participants collectively worse off than before.
Prisoner's Dilemma - A game theory scenario demonstrating why rational individuals might not cooperate even when cooperation would benefit everyone.
Money Game vs Status Game - A distinction between pursuing wealth (a positive-sum game that can benefit everyone) versus pursuing status (a zero-sum game where gains come at others' expense).
Finite Games - Games played for the purpose of winning, with fixed rules and clear endpoints.
Positive-Sum Game - A situation where total value can expand so all participants can benefit simultaneously.
Minimax - A decision rule for minimizing the worst-case potential loss when facing uncertainty or adversarial conditions.
Mechanism Design - The field of economics that designs rules, incentives, and institutions to achieve desired outcomes when participants act in their own self-interest.
Schelling Point - A solution people converge on naturally without explicit communication.
Nash Equilibrium - A state in a strategic game where no player can improve their outcome by unilaterally changing their strategy.
Maximin - A decision strategy that chooses the option whose worst-case outcome is the least bad, prioritizing protection against the worst possible scenario.
Moral Hazard - The tendency for people to take greater risks when they are insulated from the consequences, often because someone else bears the cost.
Tit for Tat - A game theory strategy that starts by cooperating and then mirrors the opponent's previous move in each subsequent round.
Costly Signaling Theory - The principle that signals must be expensive or hard to fake to credibly communicate information about the signaler.
Expected Utility Theory - The standard economic model of rational decision-making under uncertainty, where agents choose options that maximize expected utility.
Principal-Agent Problem - A conflict of interest that arises when one party (the agent) is empowered to act on behalf of another (the principal) but has different incentives and more information.

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