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Subgame Perfect Equilibrium is a refinement of Nash Equilibrium applicable in dynamic games, ensuring that players' strategies constitute a Nash Equilibrium in every subgame of the original game. It eliminates non-credible threats by requiring that strategies be optimal not just for the game as a whole, but for every point at which a decision is made.
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.
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.
Backward induction is a method used in game theory and decision-making processes to determine the optimal strategy by analyzing the game from the end to the beginning. It involves breaking down a complex problem into simpler sub-problems and solving them in reverse order to ensure rational decision-making at every stage.
Perfect information refers to a situation in which all participants in an economic or strategic interaction have complete and accurate knowledge of all relevant factors, including the actions and payoffs of other participants. This concept is crucial in game theory and economics, as it allows for the prediction of outcomes where no player has an informational advantage over others.
Sequential games are a type of game theory model where players make decisions one after another, with each player being aware of the previous players' actions. This structure allows for the strategic consideration of future moves and can lead to equilibrium outcomes such as subgame perfect equilibrium.
A sequential game is a type of game in game theory where players make decisions one after another, with each player having knowledge of the previous players' actions. This allows for strategic planning and foresight, as players can anticipate and react to the moves of others, often leading to the use of backward induction to determine optimal strategies.
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.
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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