Question

Identify the definition for each term from the following list. 1. Payoff-matrix format. 2. Game-tree format. 3. A junction on a game tree. 4. One of the final outcomes of a game tree. 5. Divides the overall game tree into nested subgames before working backward from right to left. 6. A mini-game within the overall game. 7. The process of backward induction that relies on both firms having perfect information about the decisions made in each subgame.

Answer 1

Answer:

1. Payoff matrix : Strategic form

2. Game tree format : Extensive form

3. A junction on a game tree : Decision nodes

4. One of the final outcomes of a game tree : Terminal nodes

5. Divides the overall game tree into nested subgames before working backward from right to left : Backward induction

6. A mini-game within the overall game : Subgame

7. The process of backward induction that relies on both firms having perfect information about the decisions made in each subgame : Nash equilibrium.

Explanation:

Payoff matrix is the technique for decision making where goals are dependent on interaction with others. Nash equilibrium is a strategy in which every firm tries to choose best possible outcome keeping in view the decisions of other firms.