Game Theory: An Introduction to Payoff Matrices and the Prisoner's Dilemma Game

The video introduces game theory, focusing on the basic elements and assumptions, such as players, rules, and payoffs. It explains the two by two payoff matrix, a fundamental tool in analyzing game outcomes. The prisoner's dilemma is used as a key example to illustrate strategic decision-making and the concept of interdependency. The video further explores the dominant strategy and Nash equilibrium, highlighting their significance in game theory. It concludes by suggesting more complex applications of these concepts in future lectures.

What are the two crucial assumptions in game theory mentioned in the introduction?

• Rationality and common knowledge

• Randomness and unpredictability

• Cooperation and trust

• Competition and conflict

What is the primary purpose of a payoff matrix in game theory?

• To determine the rules of the game

• To analyze possible outcomes and rewards

• To identify the players involved

• To predict future games

In the Prisoner's Dilemma, what happens if both prisoners decide to stay silent?

• One serves no time, the other serves three years

• Both serve one year in prison

• Both serve two years in prison

• Both serve three years in prison

What is the optimal strategy for a prisoner in the Prisoner's Dilemma, assuming rationality?

• To confess

• To escape

• To negotiate with the other prisoner

• To stay silent

What is a dominant strategy in game theory?

• A strategy that is best regardless of what others do

• A strategy that changes based on others' actions

• A strategy that involves cooperation

• A strategy that is least risky

What is the Nash Equilibrium in the context of the Prisoner's Dilemma?

• Both prisoners confessing

• Both prisoners staying silent

• One prisoner confessing, the other staying silent

• Both prisoners escaping

Who is the Nash Equilibrium named after?

• John Maynard Keynes

• Adam Smith

• David Ricardo

• John Nash

What does the Nash Equilibrium represent in a game?

• The most cooperative outcome

• The best response strategy for each player

• The most unpredictable outcome

• The worst possible outcome for all players

In more complex games, what can occur instead of a single Nash Equilibrium?

• No equilibrium at all

• A cooperative solution

• A single dominant strategy

• Multiple Nash Equilibria

What is the main takeaway from the Prisoner's Dilemma regarding individual decision-making?

• Individuals should always cooperate

• Individuals should always act in their own self-interest

• Individuals should rely on others' decisions

• Individuals should avoid making decisions