Medical Arms Race and Game Theory in Economics

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1) Explain what a “dominant strategy” is in game theory. 

(2) Using Box 14-1, replace the entry in the first row, second column with (125, -50). Does A have a dominant strategy? Does B? What is the solution to this game? 

(3) Why is the medical arms race less a problem today than it once was? 

Jul 13th, 2015

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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. Depending on whether "better" is defined with weak or strict inequalities, the strategy is termed strictly dominant or weakly dominant. If one strategy is dominant, than all others are dominated. For example, in the prisoner's dilemma, each player has a dominant strategy.

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Jul 13th, 2015

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Jul 13th, 2015
Oct 19th, 2017
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