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Unformatted text preview: 1/13/2009 1 Analyzing Games Âˇ We need three things to specify a game Âˇ Players Âˇ Possible strategies for each player Âˇ Payoffs for each player over outcomes Âˇ We consider a notion of equilibrium: no forces for change Analyzing Games Âˇ Players have well-defined and well-behaved preferences over outcomes Âˇ Each player is rational : he chooses the strategy that yields his most-preferred outcome Âˇ The game is clearly and correctly specified Âˇ Everything about the game is common knowledge Example â€“ The Dictator Game Âˇ Two Players: Sender and Receiver Âˇ Sender is given $10 by a rich benefactor Âˇ Sender can send $x to the Receiver Âˇ Senderâ€™s payoff: $(10-x) Âˇ Receiverâ€™s payoff: $x Example â€“ The Dictator Game Âˇ How I might draw out the dictator game 10 (0,10) (1, 9) (Senderâ€™s payoff, Receiverâ€™s payoff) SENDER 1 9 (10, 0) (9, 1) Example â€“ The Dictator Game Âˇ Not a game â€“ just a decision problem Âˇ In experiments, Senders often give significant amounts to Receivers they donâ€™t know!!! Âˇ WHY??? Âˇ Senders are not rational? Âˇ Senders value â€śfairnessâ€ť as well as money Âˇ $10 is insignificant, decisions are just random Âˇ Senders donâ€™t believe they are anonymous Âˇ Senders have evolved to behave â€śfairlyâ€ť...
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- Spring '07
- Game Theory, Receiver Sender