What is a dominant strategy in microeconomics?

A dominant strategy is a strategy for which the payoffs are always greater than any other strategy no matter what the opponent does. A dominated strategy is a strategy is a strategy for which the payoffs are always lower than any other strategy no matter what the opponent does.

What is the difference between dominant and dominated strategy?

A strategy is dominant if it leads to better outcomes than alternative strategies, and dominated if it leads to worse outcomes than alternative strategies.

What is a dominant strategy a dominant strategy is a strategy that?

2.1 Dominant strategy. “Dominant strategy” is a term in game theory that refers to the optimal option for a player among all the competitive strategy set, no matter how that player’s opponents may play, and the opposite strategy is called “inferior strategy.”

What is the difference between Nash equilibrium and dominant strategy?

According to game theory, the dominant strategy is the optimal move for an individual regardless of how other players act. A Nash equilibrium describes the optimal state of the game where both players make optimal moves but now consider the moves of their opponent.

How do you identify a dominated strategy?

A dominated strategy is a strategy which doesn’t result in the optimal outcome in any case. A strategy is dominated if there always exist a course of action which results in higher payoff no matter what the opponent does.

How do you determine a dominated strategy?

A strategy is dominated if there always exist a course of action which results in higher payoff no matter what the opponent does. Identifying strategic dominance in a game is important in identifying its Nash equilibrium, an outcome which no player would want to change.

What if there is no dominant strategy?

A dominant strategy is a strategy which results in the best payoff for a player no matter what the other firm does but a Nash equilibrium represents a strategy which maximizes payoff given what the other player would do. A game has a Nash equilibrium even if there is no dominant strategy (see example below).

Is a dominant strategy also an equilibrium strategy?

Dominant strategies are considered as better than other strategies, no matter what other players might do. In game theory, there are two kinds of strategic dominance: It must be noted that any dominant strategy equilibrium is always a Nash equilibrium. However, not all Nash equilibria are dominant strategy equilibria.

What is dominant strategy in oligopoly market structure?

Betraying the partner by confessing is the dominant strategy; it is the better strategy for each player regardless of how the other plays. This is known as a Nash equilibrium.

What is Nash equilibrium microeconomics?

Key Takeaways. The Nash equilibrium is a decision-making theorem within game theory that states a player can achieve the desired outcome by not deviating from their initial strategy. In the Nash equilibrium, each player’s strategy is optimal when considering the decisions of other players.

What is a strictly dominant strategy?

Strictly Dominant Strategy. A strategy is strictly dominant if, regardless of what any other players do, the strategy earns a player a strictly higher payoff than any other. Hence, a strategy is strictly dominant if it is always strictly better than any other strategy, for any profile of other players’ actions.

What is the definition of dominant strategy?

Dominant Strategy. A strategy is dominant if, regardless of what any other players do, the strategy earns a player a larger payoff than any other. Hence, a strategy is dominant if it is always better than any other strategy, for any profile of other players’ actions.

What is Nash equilibrium and dominant strategy?

Nash Equilibrium and Dominant Strategies. Nash Equilibrium is a term used in game theory to describe an equilibrium where each player’s strategy is optimal given the strategies of all other players. A Nash Equilibrium exists when there is no unilateral profitable deviation from any of the players involved.

What is the dominant strategy in game theory?

In game theory, a dominant strategy refers to a choice: A.) that is the best response to the strategy selected by another player. B.) that is the best response regardless of the strategy selected by another player. C.) that results in the player receiving a higher payoff than any other players.