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TL;DR

A strategy that yields a higher payoff than any alternative regardless of opponents' actions. Strictly dominant: always strictly better. Weakly dominant: always at least as good, strictly better against some opponent strategy.

By Valenke Exam Prep Team·Last updated 2026-06-03

Dominant Strategy

A strategy that yields a higher payoff than any alternative regardless of opponents' actions. Strictly dominant: always strictly better. Weakly dominant: always at least as good, strictly better against some opponent strategy.

Why it matters for interviews

Identifying dominant strategies simplifies game analysis. In quant interviews, iterated elimination of dominated strategies is a key technique for solving games without finding full equilibria.

Definition and Mathematical Foundation

A strategy that yields a higher payoff than any alternative regardless of opponents' actions. Strictly dominant: always strictly better. Weakly dominant: always at least as good, strictly better against some opponent strategy.

Application in Quantitative Finance

Identifying dominant strategies simplifies game analysis. In quant interviews, iterated elimination of dominated strategies is a key technique for solving games without finding full equilibria.

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Frequently Asked Questions

What is iterated elimination of dominated strategies?▼
Repeatedly remove strictly dominated strategies from all players. If the game reduces to a single strategy profile, it is the unique Nash equilibrium. Order of elimination does not matter for strict dominance.
Can a Nash equilibrium involve dominated strategies?▼
Never strictly dominated, but a Nash equilibrium can involve weakly dominated strategies. This is one criticism of Nash equilibrium as a solution concept.
What is the Prisoner's Dilemma and how does dominance apply?▼
Both prisoners have a dominant strategy to defect, leading to mutual defection -- a Nash equilibrium that is Pareto inferior to mutual cooperation. This illustrates how individual rationality can lead to collective suboptimality.