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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.
Relevant Degrees
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Nash Equilibrium is a fundamental concept in game theory where each player's strategy is optimal given the strategies of all other players, meaning no player can benefit by unilaterally changing their strategy. It is used to predict the outcome of strategic interactions in competitive environments, assuming that all players are rational and have complete knowledge of the game structure.
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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.
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A coordination game is a type of game theory scenario where players benefit from making the same choices or adopting the same strategies, resulting in multiple possible equilibria. The challenge lies in the players' ability to align their strategies without direct communication, often relying on conventions or focal points to achieve coordination.
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Pareto Efficiency, also known as Pareto Optimality, is a state in which resources are allocated in a way that no individual's situation can be improved without making someone else's situation worse. It is a fundamental concept in economics and game theory, used to evaluate the efficiency of resource distribution and social welfare outcomes.
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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.
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Strategic dominance refers to a situation in which one strategy yields better payoffs than any other strategy regardless of what the opponents do. In game theory, identifying and leveraging strategically dominant strategies can decisively influence the outcome of competitive scenarios.
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Common knowledge refers to information that is known by a large group of people and is assumed to be undisputed and easily accessible. It plays a crucial role in communication, decision-making, and cultural understanding, as it forms the basis for shared assumptions and mutual understanding in society.
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Coordination games are a type of game in game theory where players benefit from making the same choices or coordinating their actions. These games often have multiple Nash equilibria, and the challenge is to reach the equilibrium that maximizes the payoff for all participants.
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Refinement of equilibria refers to the process of narrowing down the set of Nash equilibria in a game to those that are more plausible or desirable based on additional criteria or assumptions. This process helps in predicting more realistic outcomes in strategic interactions by eliminating equilibria that are less likely to occur in practical scenarios.
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