What is dominant strategy equilibrium in game theory?
Key Takeaways. According to game theory, the dominant strategy is the optimal move for an individual regardless of how other players act. A Nash equilibrium describes the optimal state of the game where both players make optimal moves but now consider the moves of their opponent.
Do players have a dominant strategy in Nash equilibrium?
A Nash equilibrium is conditional upon the other player’s best strategy, but a dominant strategy is unconditional. We reach a Nash equilibrium by assuming that the other player is rational, but we can follow a dominant strategy without forecasting expected strategy of the opponent.
What is the example of game theory strategy?
The Prisoner’s Dilemma is the most well-known example of game theory. Consider the example of two criminals arrested for a crime. Prosecutors have no hard evidence to convict them. However, to gain a confession, officials remove the prisoners from their solitary cells and question each one in separate chambers.
How do you tell if a player has a dominant strategy?
The dominant strategy in game theory refers to a situation where one player has superior tactics regardless of how their opponent may play. Holding all factors constant, that player enjoys an upper hand in the game over the opposition.
What is the dominant strategy in the prisoner’s dilemma?
The dominant strategy for a player is one that produces the best payoff for that player regardless of the strategies employed by other players. The dominant strategy here is for each player to defect (i.e., confess) since confessing would minimize the average length of time spent in prison.
Is there a dominant strategy equilibrium?
Since only one of them has a dominant strategy, there is no dominant strategy equilibrium. We must then proceed by eliminating dominated strategies. As we’ve already mentioned, for the Japanese strategy ‘go North’ weakly dominates strategy ‘go South’. Therefore, we eliminate the strategy ‘go South’ for the Japanese, who will go North.
What is dominant strategy game theory?
Dominant strategy game theory refers to a circumstance where one player is at a significant advantage in comparison to another player due to the strategy they are employing. Irrespective of what the other player chooses to do, the player using the dominant strategy has full control over the outcome of the game.
What is the dominant strategy equilibrium in the Prisoner’s dilemma?
A dominant strategy equilibrium is reached when each player chooses their own dominant strategy. In the prisoner’s dilemma, the dominant strategy for both players is to confess, which means that confess-confess is the dominant strategy equilibrium (underlined in red), even if this equilibrium is not a Pareto optimal equilibrium
What is an example of game theory in economics?
Another way of describing game theory is through a decision tree. In this example, Firm A can choose to enter or leave. Firm B (the incumbent can then decide to fight (cut prices) or accommodate. If it fights, both firms make a lost (-4, -3). Therefore the dominant strategy for Firm B appears to be accommodate, leaving both firms with (1,1)