📚 Learning Guide
Game Theory
easy

In the context of game theory, which of the following scenarios represents a Pareto efficient outcome?

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Learning Path

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Choose the Best Answer

A

Both players are worse off compared to their original payoffs.

B

One player can improve their payoff without making the other player worse off.

C

Both players are at their maximum possible payoffs given the strategies chosen.

D

One player improves their payoff, but the other player stays the same.

Understanding the Answer

Let's break down why this is correct

Answer

A Pareto efficient outcome in game theory occurs when no player can be made better off without making another player worse off. This means that resources are allocated in such a way that any change would benefit one player at the expense of another. For example, imagine two friends sharing a pizza. If one friend takes more slices, the other gets fewer, which makes it impossible for both to be happier without changing the distribution. Therefore, a scenario where both friends have an equal number of slices and are satisfied with their share would be considered Pareto efficient, as any attempt to change that would leave one of them unhappy.

Detailed Explanation

A Pareto efficient outcome means both players are getting the best they can from the situation. Other options are incorrect because This option suggests both players are worse off; Here, one player can do better without hurting the other.

Key Concepts

Pareto efficiency.
Topic

Game Theory

Difficulty

easy level question

Cognitive Level

understand

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