# Game Theory: Key Terms

**Backward induction****:** The procedure of solving an extensive-form game by first considering the last mover’s decision in order to deduce the decisions of all previous movers.

**Best response****:** A strategy of a player is a *best response* to the strategies of the others in the game if, taking the other players’ strategies as given, it gives her greater payoffs than any other strategy she has available.

**Commitment****: **The ability to choose and stick with an action that might later be costly.

**Dominant strategy****:** The best response to every possible strategy of the other player(s).

**Dominant strategy equilibrium****:** A combination of strategies is a *dominant strategy equilibrium* if the relevant strategy for each player is a dominant strategy.

**Extensive-form game****:** A representation that specifies the order of play in a game.

**First-mover advantage****:** A game has a *first-mover advantage* when the first player to act in a sequential game gets a benefit from doing so.

**Game theory****:** The study of strategic interactions.

**Game tree****:** An extensive-form representation of a game.

**Mixed strategy****:** A *mixed strategy* involves choosing different actions randomly.

**Nash equilibrium****:** A strategy combination is a *Nash equilibrium* if each strategy is a best response to the strategies of others.

**Payoff matrix****:** Represents the payoffs for each action players can take.

**Pure strategy****:** A *pure strategy* involves always choosing one particular action for a situation.

**Simultaneous-move games****:** In *simultaneous-move games*, players pick their actions at the same time.

**Zero-sum game****:** In a *zero-sum game*, one player’s loss is another’s gain, so the sum of the payoffs is zero.