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In game theory, strategic dominance (commonly called simply dominance) occurs when one strategy is better than another strategy for one player, no matter how that player's opponents may play. Many simple games can be solved using dominance. The opposite, intransitivity, occurs in games where one strategy may be better or worse than another strategy for one player, depending on how the player's opponents may play.
When a player tries to choose the "best" strategy among a multitude of options, that player may compare two strategies A and B to see which one is better. The result of the comparison is one of:
This notion can be generalized beyond the comparison of two strategies.
Strategy: A complete contingent plan for a player in the game. A complete contingent plan is a full specification of a player's behavior, describing each action a player would take at every possible decision point. Because information sets represent points in a game where a player must make a decision, a player's strategy describes what that player will do at each information set.
Rationality: The assumption that each player acts to in a way that is designed to bring about what he or she most prefers given probabilities of various outcomes; von Neumann and Morgenstern showed that if these preferences satisfy certain conditions, this is mathematically equivalent to maximizing a payoff. A straightforward example of maximizing payoff is that of monetary gain, but for the purpose of a game theory analysis, this payoff can take any form. Be it a cash reward, minimization of exertion or discomfort, promoting justice, spread of ones genes, or amassing overall “utility” - the assumption of rationality states that players will always act in the way that best satisfies their ordering from best to worst of various possible outcomes.
Common Knowledge: The assumption that each player has knowledge of the game, knows the rules and payoffs associated with each course of action, and realizes that every other player has this same level of understanding. This is the premise that allows a player to make a value judgment on the actions of another player, backed by the assumption of rationality, into consideration when selecting an action.
|C||1, 1||0, 0|
|D||0, 0||0, 0|
If a strictly dominant strategy exists for one player in a game, that player will play that strategy in each of the game's Nash equilibria. If both players have a strictly dominant strategy, the game has only one unique Nash equilibrium. However, that Nash equilibrium is not necessarily "efficient", meaning that there may be non-equilibrium outcomes of the game that would be better for both players. The classic game used to illustrate this is the Prisoner's Dilemma.
Strictly dominated strategies cannot be a part of a Nash equilibrium, and as such, it is irrational for any player to play them. On the other hand, weakly dominated strategies may be part of Nash equilibria. For instance, consider the payoff matrix pictured at the right.
Strategy C weakly dominates strategy D. Consider playing C: If one's opponent plays C, one gets 1; if one's opponent plays D, one gets 0. Compare this to D, where one gets 0 regardless. Since in one case, one does better by playing C instead of D and never does worse, C weakly dominates D. Despite this, is a Nash equilibrium. Suppose both players choose D. Neither player will do any better by unilaterally deviating—if a player switches to playing C, they will still get 0. This satisfies the requirements of a Nash equilibrium. Suppose both players choose C. Neither player will do better by unilaterally deviating—if a player switches to playing D, they will get 0. This also satisfies the requirements of a Nash equilibrium.
The iterated elimination (or deletion) of dominated strategies (also denominated as IESDS or IDSDS) is one common technique for solving games that involves iteratively removing dominated strategies. In the first step, at most one dominated strategy is removed from the strategy space of each of the players since no rational player would ever play these strategies. This results in a new, smaller game. Some strategies—that were not dominated before—may be dominated in the smaller game. The first step is repeated, creating a new even smaller game, and so on. The process stops when no dominated strategy is found for any player. This process is valid since it is assumed that rationality among players is common knowledge, that is, each player knows that the rest of the players are rational, and each player knows that the rest of the players know that he knows that the rest of the players are rational, and so on ad infinitum (see Aumann, 1976).
There are two versions of this process. One version involves only eliminating strictly dominated strategies. If, after completing this process, there is only one strategy for each player remaining, that strategy set is the unique Nash equilibrium.
Strict Dominance Deletion Step-by-Step Example:
Another version involves eliminating both strictly and weakly dominated strategies. If, at the end of the process, there is a single strategy for each player, this strategy set is also a Nash equilibrium. However, unlike the first process, elimination of weakly dominated strategies may eliminate some Nash equilibria. As a result, the Nash equilibrium found by eliminating weakly dominated strategies may not be the only Nash equilibrium. (In some games, if we remove weakly dominated strategies in a different order, we may end up with a different Nash equilibrium.)
Weak Dominance Deletion Step-by-Step Example:
In any case, if by iterated elimination of dominated strategies there is only one strategy left for each player, the game is called a dominance-solvable game.
An evolutionarily stable strategy (ESS) is a strategy which, if adopted by a population in a given environment, is impenetrable, meaning that it cannot be invaded by any alternative strategy that are initially rare. It is relevant in game theory, behavioural ecology, and evolutionary psychology. An ESS is an equilibrium refinement of the Nash equilibrium. It is a Nash equilibrium that is "evolutionarily" stable: once it is fixed in a population, natural selection alone is sufficient to prevent alternative (mutant) strategies from invading successfully. The theory is not intended to deal with the possibility of gross external changes to the environment that bring new selective forces to bear.
In game theory and economic theory, a zero-sum game is a mathematical representation of a situation in which each participant's gain or loss of utility is exactly balanced by the losses or gains of the utility of the other participants. If the total gains of the participants are added up and the total losses are subtracted, they will sum to zero. Thus, cutting a cake, where taking a larger piece reduces the amount of cake available for others as much as it increases the amount available for that taker, is a zero-sum game if all participants value each unit of cake equally.
In game theory, the Nash equilibrium, named after the mathematician John Forbes Nash Jr., is a proposed solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy.
The game of chicken, also known as the hawk–dove game or snowdrift game, is a model of conflict for two players in game theory. The principle of the game is that while the outcome is ideal for one player to yield, but the individuals try to avoid it out of pride for not wanting to look like a 'chicken'. So each player taunts the other to increase the risk of shame in yielding. However, when one player yields, the conflict is avoided, and the game is for the most part over.
In game theory, the best response is the strategy which produces the most favorable outcome for a player, taking other players' strategies as given. The concept of a best response is central to John Nash's best-known contribution, the Nash equilibrium, the point at which each player in a game has selected the best response to the other players' strategies.
In game theory, coordination games are a class of games with multiple pure strategy Nash equilibria in which players choose the same or corresponding strategies.
In game theory, the centipede game, first introduced by Robert Rosenthal in 1981, is an extensive form game in which two players take turns choosing either to take a slightly larger share of an increasing pot, or to pass the pot to the other player. The payoffs are arranged so that if one passes the pot to one's opponent and the opponent takes the pot on the next round, one receives slightly less than if one had taken the pot on this round. Although the traditional centipede game had a limit of 100 rounds, any game with this structure but a different number of rounds is called a centipede game.
Game theory is the branch of mathematics in which games are studied: that is, models describing human behaviour. This is a glossary of some terms of the subject.
In game theory, battle of the sexes (BoS) is a two-player coordination game. Some authors refer to the game as Bach or Stravinsky and designate the players simply as Player 1 and Player 2, rather than assigning sex.
In game theory, a solution concept is a formal rule for predicting how a game will be played. These predictions are called "solutions", and describe which strategies will be adopted by players and, therefore, the result of the game. The most commonly used solution concepts are equilibrium concepts, most famously Nash equilibrium.
An extensive-form game is a specification of a game in game theory, allowing for the explicit representation of a number of key aspects, like the sequencing of players' possible moves, their choices at every decision point, the information each player has about the other player's moves when they make a decision, and their payoffs for all possible game outcomes. Extensive-form games also allow for the representation of incomplete information in the form of chance events modeled as "moves by nature".
In game theory, normal form is a description of a game. Unlike extensive form, normal-form representations are not graphical per se, but rather represent the game by way of a matrix. While this approach can be of greater use in identifying strictly dominated strategies and Nash equilibria, some information is lost as compared to extensive-form representations. The normal-form representation of a game includes all perceptible and conceivable strategies, and their corresponding payoffs, for each player.
Backward induction is the process of reasoning backwards in time, from the end of a problem or situation, to determine a sequence of optimal actions. It proceeds by first considering the last time a decision might be made and choosing what to do in any situation at that time. Using this information, one can then determine what to do at the second-to-last time of decision. This process continues backwards until one has determined the best action for every possible situation at every point in time. It was first used by Zermelo in 1913, to prove that chess has pure optimal strategies.
In game theory, rationalizability is a solution concept. The general idea is to provide the weakest constraints on players while still requiring that players are rational and this rationality is common knowledge among the players. It is more permissive than Nash equilibrium. Both require that players respond optimally to some belief about their opponents' actions, but Nash equilibrium requires that these beliefs be correct while rationalizability does not. Rationalizability was first defined, independently, by Bernheim (1984) and Pearce (1984).
In game theory, folk theorems are a class of theorems about possible Nash equilibrium payoff profiles in repeated games. The original Folk Theorem concerned the payoffs of all the Nash equilibria of an infinitely repeated game. This result was called the Folk Theorem because it was widely known among game theorists in the 1950s, even though no one had published it. Friedman's (1971) Theorem concerns the payoffs of certain subgame-perfect Nash equilibria (SPE) of an infinitely repeated game, and so strengthens the original Folk Theorem by using a stronger equilibrium concept subgame-perfect Nash equilibria rather than Nash equilibrium.
In game theory, a correlated equilibrium is a solution concept that is more general than the well known Nash equilibrium. It was first discussed by mathematician Robert Aumann in 1974. The idea is that each player chooses their action according to their observation of the value of the same public signal. A strategy assigns an action to every possible observation a player can make. If no player would want to deviate from the recommended strategy, the distribution is called a correlated equilibrium.
In game theory, the purification theorem was contributed by Nobel laureate John Harsanyi in 1973. The theorem aims to justify a puzzling aspect of mixed strategy Nash equilibria: that each player is wholly indifferent amongst each of the actions he puts non-zero weight on, yet he mixes them so as to make every other player also indifferent.
In game theory, a subgame perfect equilibrium is a refinement of a Nash equilibrium used in dynamic games. A strategy profile is a subgame perfect equilibrium if it represents a Nash equilibrium of every subgame of the original game. Informally, this means that if the players played any smaller game that consisted of only one part of the larger game, their behavior would represent a Nash equilibrium of that smaller game. Every finite extensive game with perfect recall has a subgame perfect equilibrium.
Risk dominance and payoff dominance are two related refinements of the Nash equilibrium (NE) solution concept in game theory, defined by John Harsanyi and Reinhard Selten. A Nash equilibrium is considered payoff dominant if it is Pareto superior to all other Nash equilibria in the game. When faced with a choice among equilibria, all players would agree on the payoff dominant equilibrium since it offers to each player at least as much payoff as the other Nash equilibria. Conversely, a Nash equilibrium is considered risk dominant if it has the largest basin of attraction. This implies that the more uncertainty players have about the actions of the other player(s), the more likely they will choose the strategy corresponding to it.
In game theory, an epsilon-equilibrium, or near-Nash equilibrium, is a strategy profile that approximately satisfies the condition of Nash equilibrium. In a Nash equilibrium, no player has an incentive to change his behavior. In an approximate Nash equilibrium, this requirement is weakened to allow the possibility that a player may have a small incentive to do something different. This may still be considered an adequate solution concept, assuming for example status quo bias. This solution concept may be preferred to Nash equilibrium due to being easier to compute, or alternatively due to the possibility that in games of more than 2 players, the probabilities involved in an exact Nash equilibrium need not be rational numbers.