Lecture3 - 1/15/2009 1 Example – George and Hiromi GEORGE...

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Unformatted text preview: 1/15/2009 1 Example – George and Hiromi GEORGE R (2,0) 1 3 GEORGE HIROMI T S U W V 1 (3,1) 2 GEORGE (0,0) (1,2) Example – The Smoking Decision ¡ Carmen wants to try smoking, and then quit Example – The Smoking Decision ¡ Addiction creates a Future Carmen with different preferences from Today’s Carmen Example – The Smoking Decision ¡ Today’s Carmen recognizes the game she plays with Future Carmen, who will Continue Example – The Smoking Decision ¡ We know Future Carmen won’t choose Not, so we eliminate it Example – The Smoking Decision ¡ We now know that Today’s Carmen won’t choose Try because it leads to Continue 1/15/2009 2 Example – The Smoking Decision ¡ We can highlight the choices the players will make with thick lines, arrows, or check marks Example – The Entry Game INCUMBENT Fight (0,0) (CHALLENGER’s payoff, INCUMBENT’s payoff) CHALLENGER Enter Stay Out Acquiesce (1,2) (2,1) Example – The Entry Game ¡ The Incumbent can threaten to Fight, so that...
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This note was uploaded on 03/13/2009 for the course ECON 398 taught by Professor Emre during the Spring '07 term at University of Michigan.

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Lecture3 - 1/15/2009 1 Example – George and Hiromi GEORGE...

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