Lecture 5 - Homework Due Friday 4:15PM Hand homework in to...

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1/22/2009 1 Homework Due Friday 4:15PM Hand homework in to your GSI during discussion section OR Turn in homework to the specially marked box outside Lorch Hall 109 by 4:15PM Today: Chapter 4, Next Week: Chapter 5 Homework Due Friday 4:15PM Dixit & Skeath, Chapter 3, Question 9, Part c) Should read: “Explain intuitively why the difference between the outcomes in Part a) and Part b) arises.” Finding Nash Equilibria We’d like a method for finding NE Player 2 1 2 3 4 A 5 7 6 4 11 12 8 22 NE occur where Best Responses intersect, i.e. in cells with two circles Player 1 5 , 7 6 , 4 11 , 12 8 , 22 B 2 , 6 15 , 3 1 , 0 7 , 2 C 3 , 9 2 , 6 19 , 9 6 , 5 D 0 , 0 0 , 1 9 , 17 17 , 12 Nash Equilibrium Philosophy Equilibrium as a point where there are No Incentives for Change How to talk of “change” and “best response” in a game that is only played once? Think of Nash Equilibrium as system of beliefs about what others will do beliefs are subjective beliefs are correct in equilibrium action that is optimal given beliefs Example – Attributed to A.W. Tucker Two Prisoner’s brought in for interrogation They are put in separate rooms Clyde Barrow Mum Fink Known as “The Prisoner’s Dilemma” Bonnie Parker Mum 2 , 2 0 , 3 Fink 3 , 0 1, 1 Bonnie & Clyde (ca 1933)
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