6.6 Game Theory
Game Theory: Seeks to understand whether strategic interaction will lead to competition or co-operation between rivals. (Players, Strategic options and Pay-offs).
Nash equilibrium: Occurs when each player does what is best for themselves, given what their rivals may do in response.
Dominant strategy: Is a player’s best response, whatever its rival decides.
Single-Period game: The game is only played once. In a repeated game, the game is played a number of rounds.
Credible commitment/threat: Has to be one that is optimal to carry out.