Game Theory Lecture 7

An action or statement that shows a commitment to a certain behavior in the future.

The ability to convince others that you will follow through on your commitments.

A threat is credible if it is believable and likely to be carried out. In game theory, a credible threat means the player will actually take the action they are threatening to in order to change the other player's behavior.

A situation in which a player can make its threat credible by changing its payoff structure in a way that eliminates its incentive to deviate from its commitment.

A player's actions are constrained by its commitments, making it less likely to deviate from its stated strategy.

A player's actions are influenced by the payoffs it receives in the game.

A situation in which a player's actions are influenced by the actions of other players, leading to strategic decision-making.

A player is incentivised to switch strategies if it results in a higher payoff.

A situation where a company takes action to prevent competitors from entering a market.

A strategy where a company establishes a presence in a market before competitors can, aiming to capture the majority of the market share.

The situation where a company gains a significant advantage in a local market due to the absence of strong competition.

The point where two or more companies are simultaneously choosing their best strategy, and neither has an incentive to change their strategy given the other players' strategies.

A situation where actions taken by one company affect the potential profits of other companies, often encouraging competition or cooperation.

The ability to make a move or decision that impacts future outcomes, particularly in competitive situations.

The use of pricing, product features, marketing, or other strategies to discourage new competitors from entering the market.

A company's actions and strategies that allow it to gain a dominant position in a market by actively preventing or discouraging competitors.

The situation where only one firm can profitably produce a new product.

A situation where a company threatens to use aggressive tactics such as cutting prices or increasing production to discourage new entrants.

The player who acts first in a sequential game has a strategic advantage, often leading to a more favorable outcome.

A payment from governments to companies to help them stay in the market or reduce production costs.

The benefit or advantage to a company from having a head start in a market.

The situation where a company has a significant cost advantage over potential entrants.

A threat that is not believed by the opponent is an empty threat. It lacks the power to influence the opponent's actions.

When a company is willing to fight to protect its market share, even if it means incurring losses.

A dominant strategy is a course of action that yields the best outcome for a player regardless of what the opponent does.

The situation where a company's actions make it appear unpredictable and likely to engage in aggressive tactics.

In sequential games, the player who moves last has the advantage of knowing the opponent's actions and can adjust their own strategy accordingly.

A way to make a threat credible is to make it costly for the player to back down from the threat. This discourages the opponent from challenging the threat.

A situation in game theory where each player chooses the best strategy regardless of what the other player does. This leads to a predictable outcome where both players act in their self-interest, even if it doesn't lead to the best overall outcome.

A game where players move in turn, reacting to each other's actions and decisions. Each player has to consider the potential moves of the other player.

A visual representation of possible moves in a game, shown as a decision tree. Each branch represents a possible move, and the final outcome depends on the choices made.

A scenario where players have incomplete information about each other's intentions and must choose their strategy simultaneously. This can lead to suboptimal outcomes.

A strategy where a firm takes an action that seemingly puts itself at a disadvantage, but actually improves its outcome in the game. This works by influencing the other player's decisions.

The ability of one party in a negotiation to influence the outcome in their favor. Credible threats can enhance bargaining power.

A situation where firms collaborate on research and development to achieve a shared goal, such as developing a new product or technology.