Sample interview questions: Explain the concept of a dominant strategy equilibrium and its significance in game theory.
Sample answer:
1. Dominant Strategy Equilibrium:
In game theory, a dominant strategy equilibrium occurs when each player has a strategy that is superior to all other strategies, regardless of what the other players do. In other words, a dominant strategy is one that maximizes a player’s payoff no matter what the other players choose.
2. Key Features:
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Uniqueness: Unlike Nash equilibrium, which allows for multiple possible outcomes, a dominant strategy equilibrium is unique. Each player has only one dominant strategy, and this strategy leads to a specific outcome.
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Predictability: The outcome of a game with a dominant strategy equilibrium is more predictable compared to games with multiple Nash equilibria. Since each player has a clear best strategy, the resulting outcome is often straightforward.
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Self-Enforcing: Dominant strategies are self-enforcing because each player has an incentive to stick to their dominant strategy, even if they know the other players might deviate. This is because deviating from a dominant strategy would result in a lower payoff.
3. Significance in Game Theory:
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Strategic Decision-Making: Dominant strategy equilibrium provides a powerful tool for analyzing strategic decision-making in a wide range of scenarios, including economic interactions, political negotiations, and military conflicts.
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Simplicity and Clarity: The concept of dominant strategy equilibrium is relatively simple to understand and apply, making it accessible to researc… Read full answer
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