Enhance Your Learning with Economics - Game Theory Flash Cards for quick understanding
A branch of mathematics and economics that studies strategic decision-making in situations where the outcome of one person's decision depends on the decisions of others.
A concept in game theory where each player's strategy is optimal given the strategies of all other players, resulting in a stable outcome.
A classic example of a non-cooperative game where two individuals, acting in their own self-interest, end up in a suboptimal outcome due to a lack of trust and cooperation.
A strategy that yields the highest payoff for a player regardless of the strategies chosen by other players.
A strategy that involves randomizing actions to achieve the best possible outcome in a game.
A version of the prisoner's dilemma where the game is played repeatedly, allowing for the possibility of cooperation and the emergence of strategies like tit-for-tat.
Games where players can form coalitions and make binding agreements to achieve higher payoffs through cooperation.
Games where players make decisions independently and do not have the ability to form binding agreements.
The study of negotiations and the allocation of resources in situations where two or more parties have conflicting interests.
A market mechanism where buyers bid for goods or services, and the highest bidder wins the item being auctioned.
A field of economics that combines insights from psychology and economics to understand how individuals make economic decisions and how their behavior deviates from rationality.
The process of making choices when the outcome is uncertain, and the probabilities of different outcomes are not known with certainty.
The trade-off between the potential for gain and the potential for loss in a decision or investment.
A situation where one party in a transaction has more or better information than the other party, leading to an imbalance of power and potential market failures.
The degree to which prices in a market reflect all available information and resources are allocated efficiently.
Goods or services that are non-excludable and non-rivalrous, meaning that they are available to everyone and one person's consumption does not diminish the availability for others.
The costs or benefits that are imposed on or conferred to third parties as a result of economic activities, without compensation.
Situation where the allocation of goods and services by a free market is not efficient, leading to a suboptimal outcome.
Systematic patterns of deviation from rationality in judgment and decision-making, often influenced by cognitive and emotional factors.
A behavioral economic theory that describes how individuals make decisions under risk and uncertainty, emphasizing the role of perceived gains and losses.
The tendency of individuals to follow the actions and decisions of a larger group, often leading to irrational behavior and market bubbles.
A cognitive bias where individuals rely too heavily on the first piece of information encountered when making decisions or estimates.
The tendency for individuals to prefer avoiding losses over acquiring equivalent gains, leading to risk-averse behavior.
The tendency for individuals to value an object or resource more when they own it, compared to when they do not.
The tendency to search for, interpret, and remember information in a way that confirms one's preexisting beliefs or hypotheses.
A mental shortcut where individuals make judgments based on the ease with which examples or instances come to mind.
The influence of the way information is presented or framed on individuals' decisions and judgments.
The tendency to continue investing in a project or decision based on the resources already invested, even when the expected benefits no longer outweigh the costs.
The tendency for individuals to overestimate their own abilities, knowledge, or performance, leading to overconfident decision-making.
The preference for maintaining the current state of affairs and resisting changes, even when the changes may be beneficial.
The practice of exchanging things with others for mutual benefit, often based on the principle of treating others as they have treated you.
The concept of justice and equality in the distribution of resources, rewards, and opportunities.
The belief or confidence in the reliability, honesty, and integrity of others, often influencing economic transactions and cooperation.
The selfless concern for the well-being of others, often leading to acts of kindness and cooperation.
Rewards or punishments that motivate individuals to act in a certain way, often influencing economic behavior and decision-making.
A situation where one party (the principal) delegates decision-making authority to another party (the agent), but the agent may act in their own self-interest rather than the best interest of the principal.
The risk that one party may take excessive risks or engage in undesirable behavior because they do not bear the full consequences of their actions.
A situation where one party has more information than the other party in a transaction, leading to an imbalance of information and potentially unfavorable outcomes.
The act of conveying information or intentions to others through costly or difficult-to-fake signals, often used to overcome information asymmetry.
A situation where individuals can benefit from a public good without contributing to its provision, leading to underprovision of the good.
A situation where individuals, acting independently and rationally, deplete a shared resource, leading to its degradation or depletion.
Examples of real-life situations that resemble the prisoner's dilemma, where individuals face a choice between cooperation and betrayal.
The practical use of game theory concepts and strategies in economic analysis, decision-making, and policy design.