Personal Dev Game Theory¶
10 cards — 🟢 3 easy | 🟡 4 medium | 🔴 3 hard
🟢 Easy (3)¶
1. What is the prisoner's dilemma and what is its core lesson?
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Two players each choose to cooperate or defect. If both cooperate, both do well. If one defects while the other cooperates, the defector wins big and the cooperator loses. If both defect, both do poorly. The core lesson: individually rational behavior (defecting) produces collectively worse outcomes than mutual cooperation. This pattern appears in arms races, price wars, and everyday trust situations.2. What is the difference between a zero-sum and a positive-sum game?
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In a zero-sum game, one player's gain is exactly another's loss — the total value is fixed (poker, territory disputes). In a positive-sum game, cooperation can increase total value so all players gain (trade, knowledge sharing, most workplace collaborations). Treating positive-sum situations as zero-sum leads to unnecessary conflict and wasted opportunity. Most real-world interactions have positive-sum potential.3. What is the tragedy of the commons and what causes it?
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The tragedy of the commons occurs when individuals acting in self-interest deplete a shared resource, even though it harms everyone. Each person captures the full benefit of using the resource but shares only a fraction of the cost of depletion. Examples: overfishing, shared-nothing team documentation, cloud cost overruns. It is caused by the mismatch between individual incentives and collective welfare, especially when enforcement or coordination is weak.🟡 Medium (4)¶
1. What is a Nash equilibrium and why can it be collectively bad?
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A Nash equilibrium is a state where no player can improve their outcome by unilaterally changing strategy — everyone is doing the best they can given what everyone else is doing. It can be collectively bad because stable does not mean optimal. In the prisoner's dilemma, mutual defection is a Nash equilibrium even though mutual cooperation would make everyone better off. Systems can get stuck in bad equilibria without external coordination or rule changes.2. What is the tit-for-tat strategy and why did it win Axelrod's tournament?
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Tit-for-tat starts by cooperating, then copies whatever the other player did last round. It won Robert Axelrod's iterated prisoner's dilemma tournament because it is: (1) nice — never defects first, (2) retaliatory — punishes defection immediately, (3) forgiving — returns to cooperation after punishment, (4) clear — opponents quickly learn how it behaves. It thrives in repeated interactions where reputation matters.3. What is a Schelling focal point and why does it matter for coordination?
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A Schelling focal point is a solution people converge on without communication because it feels natural, obvious, or culturally salient. Example: if two people must meet in New York without coordinating, many choose Grand Central at noon. Focal points matter because many coordination problems have no objectively correct answer — the best answer is the one others are most likely to pick. Conventions, defaults, and norms function as focal points.4. What is a commitment device and how does it change strategic behavior?
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A commitment device is a deliberate restriction on your own future choices to make a promise or threat credible. Examples: burning bridges (so retreat is impossible), posting a public deadline (reputation at stake), automatic escalation policies. It works because rational opponents recognize you cannot back down, which changes their calculations. Without commitment devices, threats and promises can be dismissed as cheap talk.🔴 Hard (3)¶
1. What is mechanism design and how does it differ from standard game theory?
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Standard game theory analyzes existing games: given the rules and incentives, what will players do? Mechanism design works in reverse: given the desired outcome, what rules and incentives should you create? It is "reverse game theory" — designing the game so that self-interested players naturally produce the desired collective result. Examples: auction design, incentive structures, voting systems, and performance review processes.2. What is information asymmetry and what problems does it create in strategic interactions?
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Information asymmetry exists when one party knows something the other does not. It creates two major problems: adverse selection (before a deal — the uninformed party gets stuck with bad options, like buying a used car) and moral hazard (after a deal — the informed party takes risks because the other bears the cost, like insured drivers being less careful). Solutions include signaling, screening, reputation systems, and transparency requirements.3. Why do repeated games produce different outcomes than one-shot games, and what is the shadow of the future?