Game Theory Essentials – Strategy Concepts and
Problem Solutions (Joel Watson 3rd Edition)
Part 1: Basic Concepts and Terminology
1. What is a game in game theory?
A: A situation of strategic interdependence between players, where each
player's payoff depends on their own action and the actions of others.
2. What are the two primary ways to represent a game?
A: The normal form (strategic form) and the extensive form.
3. What is a strategy in game theory?
A: A complete contingent plan of action for a player, describing what
they will do in every possible circumstance.
4. What is the key difference between an action and a strategy?
A: An action is a move available at a specific point, while a strategy is a
full plan that specifies actions for all possible points in the game.
5. What does "common knowledge" mean?
A: A fact is common knowledge if everyone knows it, everyone knows
that everyone knows it, and so on, ad infinitum.
6. What is the difference between a static game and a dynamic
game?
A: A static game involves players moving simultaneously (or without
knowledge of others' moves), while a dynamic game involves sequential
moves.
, 7. What is the Prisoners' Dilemma used to illustrate?
A: A situation where individual rationality leads to a collectively worse
outcome (a Pareto inefficient result).
8. In a normal-form game, what does a cell in the payoff matrix
represent?
A: The payoffs (or outcomes) for each player resulting from a specific
combination of strategies chosen by all players.
9. What is a payoff?
A: A number representing the utility or benefit a player receives from a
particular outcome of the game.
10. What is the fundamental assumption about players in non-
cooperative game theory?
A: Players are rational and act to maximize their own payoffs.
Part 2: Dominance and Best Responses
11. What is a strictly dominant strategy?
A: A strategy that yields a strictly higher payoff for a player than any
other strategy, regardless of what the other players do.
12. What is the solution concept that iteratively eliminates strictly
dominated strategies?
A: Iterated Elimination of Strictly Dominated Strategies (IESDS).
13. If a player has a strictly dominant strategy, what must they do in
a rational outcome?
A: They must play that strictly dominant strategy.
Problem Solutions (Joel Watson 3rd Edition)
Part 1: Basic Concepts and Terminology
1. What is a game in game theory?
A: A situation of strategic interdependence between players, where each
player's payoff depends on their own action and the actions of others.
2. What are the two primary ways to represent a game?
A: The normal form (strategic form) and the extensive form.
3. What is a strategy in game theory?
A: A complete contingent plan of action for a player, describing what
they will do in every possible circumstance.
4. What is the key difference between an action and a strategy?
A: An action is a move available at a specific point, while a strategy is a
full plan that specifies actions for all possible points in the game.
5. What does "common knowledge" mean?
A: A fact is common knowledge if everyone knows it, everyone knows
that everyone knows it, and so on, ad infinitum.
6. What is the difference between a static game and a dynamic
game?
A: A static game involves players moving simultaneously (or without
knowledge of others' moves), while a dynamic game involves sequential
moves.
, 7. What is the Prisoners' Dilemma used to illustrate?
A: A situation where individual rationality leads to a collectively worse
outcome (a Pareto inefficient result).
8. In a normal-form game, what does a cell in the payoff matrix
represent?
A: The payoffs (or outcomes) for each player resulting from a specific
combination of strategies chosen by all players.
9. What is a payoff?
A: A number representing the utility or benefit a player receives from a
particular outcome of the game.
10. What is the fundamental assumption about players in non-
cooperative game theory?
A: Players are rational and act to maximize their own payoffs.
Part 2: Dominance and Best Responses
11. What is a strictly dominant strategy?
A: A strategy that yields a strictly higher payoff for a player than any
other strategy, regardless of what the other players do.
12. What is the solution concept that iteratively eliminates strictly
dominated strategies?
A: Iterated Elimination of Strictly Dominated Strategies (IESDS).
13. If a player has a strictly dominant strategy, what must they do in
a rational outcome?
A: They must play that strictly dominant strategy.
