Equilibrium selection refers to the process of determining which equilibrium will be reached in a game with multiple equilibria, often guided by criteria such as risk dominance, payoff dominance, or evolutionary stability. This concept is crucial in game theory as it helps predict outcomes in strategic interactions where players have multiple rational responses.

Equilibrium Selection

Equilibrium selection

process of determining

Multiple equilibria refer to situations in which an economic model or system can rest at different equilibrium points under the same external conditions. This phenomenon often arises in systems with non-linear dynamics or strategic interactions, leading to potential unpredictability and path dependence in outcomes.

multiple equilibria

Risk dominance refers to a situation in game theory where one strategy is more likely to be selected because it minimizes potential losses compared to other strategies, even if it isn't the strategy with the highest payoff. It plays a crucial role in determining equilibrium selection in games with multiple Nash equilibria, guiding players towards strategies that are safer against potential deviations by others.

risk dominance

Payoff dominance is a criterion in game theory used to select among multiple Nash equilibria by choosing the one that provides the highest payoff to all players. It assumes that players will coordinate on the equilibrium that is mutually most beneficial, thereby maximizing collective outcomes.

payoff dominance

Evolutionary stability refers to a strategy in a game-theoretical context that, if adopted by a population, cannot be invaded by any alternative strategy due to its higher fitness. It is a fundamental principle in evolutionary biology that explains how certain traits or behaviors persist and dominate within a population over time.

evolutionary stability

Game theory is a mathematical framework used for analyzing strategic interactions where the outcome for each participant depends on the actions of all involved. It provides insights into competitive and cooperative behaviors in economics, politics, and beyond, helping to predict and explain decision-making processes in complex scenarios.

game theory

predict outcomes

Strategic interactions occur when the outcome for each participant depends not only on their own actions but also on the actions of others, requiring anticipation and adaptation to others' strategies. These interactions are central to game theory and are crucial in economics, political science, and any field where decision-making entities influence each other.

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