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Strictly Dominated Strategy

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Business Microeconomics

Definition

A strictly dominated strategy is a choice in a game that is always worse than another strategy, regardless of what the other players do. If a player has a strictly dominated strategy, they can always achieve a better outcome by choosing an alternative strategy, making it rational to abandon the dominated option. This concept is closely tied to Nash equilibrium and dominant strategies, as identifying strictly dominated strategies helps simplify decision-making in strategic interactions.

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5 Must Know Facts For Your Next Test

  1. Strictly dominated strategies can be eliminated from consideration in strategic games, as rational players would not choose them.
  2. In a game where all players have strictly dominated strategies, those strategies can lead to suboptimal outcomes for the players involved.
  3. Identifying strictly dominated strategies helps in reaching a Nash equilibrium more easily, as it narrows down the choices for each player.
  4. A strictly dominated strategy is different from a weakly dominated strategy; the latter may be better in some scenarios but not worse in all.
  5. The concept of strictly dominated strategies plays a critical role in finding dominant strategies that simplify decision-making for players.

Review Questions

  • How does recognizing strictly dominated strategies influence decision-making in game theory?
    • Recognizing strictly dominated strategies allows players to eliminate options that will never yield the best outcomes, simplifying their decision-making process. By discarding these inferior choices, players can focus on strategies that potentially lead to better payoffs. This streamlining of options is crucial in identifying more favorable strategies and can facilitate reaching Nash equilibria in games.
  • What is the difference between strictly dominated and weakly dominated strategies, and why is this distinction important?
    • Strictly dominated strategies are always worse than another option regardless of opponents' actions, while weakly dominated strategies may be better in some situations but not worse in all. This distinction is important because it affects how players analyze their choices and strategize in games. Recognizing strictly dominated strategies leads to a more definitive elimination process, while weakly dominated strategies may require additional analysis to determine if they should still be considered.
  • Evaluate the implications of strictly dominated strategies on reaching Nash equilibria in competitive environments.
    • Strictly dominated strategies significantly impact the path to reaching Nash equilibria by simplifying the strategic landscape for players. When players discard strictly dominated options, they can concentrate on viable strategies that may lead to mutual best responses. This alignment often accelerates the convergence toward Nash equilibria as players adopt optimal behaviors based on their opponents' likely actions, ultimately fostering more stable and predictable outcomes in competitive settings.

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