A
Adverse selection, 68, 87–91
Advertising, purpose of, 106
B
Backward induction, 45–48
Basic Hotelling location game, 107–108
Birth of game theory, 3
Boiling in Oil contract, 71
Brinkmanship, 94
Business Week, 89
C
Centipede game, 54
Chicken game, 22–25
Common entries contest, 39
Common knowledge, 5–6
Communication, 71–73
Conditional average, 78
Constant-sum games, 27
Contracts, theory of
communication, 71–73
examples from ancient history, 73–76
hidden information vs. hidden actions, 67–71
misinformation, 71–73
signal jamming, 71–73
Cooperation, 97. See also Team cooperation, building
Cooperative coordination games, 25–26
Cream skimming, 78
Cut off communication, 95–96
D
Dating game, 23–25
Decision making
and game theory, 1, 2
Default option bias, 119
Discount factor, 60
Dominant and dominated strategies, 11–13
Dominant strategy equilibrium, 13, 22, 36
Dominated strategies, 33–34
Durable goods problem, 83–84
E
Extra-large game, 35, 36
F
Fallacy of composition, 111
Fixed-Sum games, 26–28, 32
Focal points, 38–40
Folk Theorem, 59
Free rider problem, 111
G
Grim Trigger strategy, 59, 62
H
Happy Hours, 16–17, 22
Hawk–Dove game, 23–25
Health Maintenance Organizations (HMOs), 71
Hidden information vs. hidden actions, 67–71
I
Infinitely repeated games, 58–60
Iterated dominance, 33–34
K
kidnapping and blackmail, 63–64
L
Larger games, 34–38
Larger sequential games, 53–55
centipede game, 54
extra-large game, 53
Law of demand, 99
Lemons Problem, 69
M
Making threats, 96–97
Marriage Game, 19
Matching pennies, 26–27
Misinformation, 71–73
Mixed Strategy Nash Equilibrium, 27. See also Nash Equilibrium
Moral hazard, 70, 111, 91–93
Moral hazard for tax collectors and tax farming, 73–74
N
Nash bargaining game, 93
Nash Equilibrium, 4, 13–16, 18, 22, 25, 28, 36, 39, 93, 102
definition of, 101
North Atlantic Treaty Organization (NATO), 113
O
One shot, 5
On the Theory of Games of Strategy (von Neumann), 3
P
Payoff matrix, 11
Payoffs, 4–5, 19–20
Pay tribute or we will invade, 73
Price discrimination
corporate games I, 82–83
Pricing games, 103–104
Prisoner’s Dilemma, 21–22
Propitious selection, 79
Pure coordination game, 26
Q
Quantity games, 99–102
R
Rate of time preference, 60
Rationality, 6
Repeated games
cooperation, evolution of, 61–63
examples of, 61–63
game changers, kidnapping and blackmail, 63–64
infinitely repeated games, 58–60
patience, importance of, 60–61
situations, not encourage cooperation, 57–58
Risk homeostasis, psychology, 80
Rock, Paper, Scissors game, 41–43
S
Salami Tactics, 95
Screening, 87–91, 74–76
Sequential games, 45–56
backward induction, 45–48
first and second mover advantages, 48–51
irrational opponent, 55–56
larger sequential games, 53–55
order matters, 51–53
subgame perfect equilibria, 45–48
Signaling, 87–91
Signal jamming, 71–73
Simultaneous, one-shot games
dominant and dominated strategies, 11–13
Nash Equilibrium, 13–16
payoffs, 19–20
practice and simple algorithm, for solution, 16–18
Stability in Competition (Hotelling), 104
Stag hunt, 25
Standard economics vs. game theory, 1–2
Standard game types
Chicken game, 22–25
cooperative coordination games, 25–26, 31–32
dating game, 23–25
Fixed-Sum games, 26–28, 32
Hawk–Dove game, 23–25
Prisoner’s Dilemma, 21–22
Zero-Sum game, 26–28
Status quo bias, 119
Strategic interdependent analysis, 3
Subgame perfect equilibria, 45–48
T
Team cooperation, building
consumption in teams, 112–113
problem with committees, 109–110
production in teams, 110–111
The Evolution of Cooperation (Axelrod), 61
Theory of contracts
communication, 71–73
examples from ancient history, 73–76
hidden information vs. hidden actions, 67–71
misinformation, 71–73
signal jamming, 71–73
Theory of Games and Economic Behavior (von Neumann and Morgenstern), 3
The Strategy of Conflict (Schelling), 39
Trembling Hands, 40–41
W
Ways of spending money, 112
Weakly dominant strategy, 38
Wealth of Nations (Smith), 2
Writing a contract, 68
Z
Zero-Sum game, 26–28, 32