Chapter-3 - Chapter 3:Eliminating the Impossible "How often...

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Chapter 3:Eliminating the Impossible "How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?" -- Sherlock Holmes in A Study in Scarlet. "How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?" -- Sherlock Holmes in A Study in Scarlet. We are going to eliminate the strategies that rational players will never play. We are going to eliminate the strategies that rational players will never play. A Player is Rational if she acts in her best interests. Defined:
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Tosca Scarpia Tosca 2,2 4,1 1,4 3,3 Real Blanks Stab Consent Tosca prefers stab regardless of what Scarpia will do. A rational Tosca will choose stab . Scarpia prefers real regardless of what Tosca will do. Scarpia will choose real . Tosca prefers stab regardless of what Scarpia will do. A rational Tosca will choose stab . Scarpia prefers real regardless of what Tosca will do. Scarpia will choose real .
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Strict Dominance A strategy s strictly dominates a strategy s if the payoff from s is strictly higher than that from s for any strategies chosen by the other players. Defined: A strategy is the dominant strategy if it strictly dominates every other strategy. Defined: A rational player never uses a strictly dominated strategy. A rational player always uses a dominant strategy. A rational player never uses a strictly dominated strategy. A rational player always uses a dominant strategy.
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White Flight and Racial Segregation “White flight“: the exodus of white families upon the arrival of a few black families. Could white flight occur even if both blacks and whites prefer to have a racially integrated neighborhood? “White flight“: the exodus of white families upon the arrival of a few black families. Could white flight occur even if both blacks and whites prefer to have a racially integrated neighborhood? Eight houses in a neighborhood, each is owned by a different landlord. Willingness to pay for rent depends on the racial composition. Eight houses in a neighborhood, each is owned by a different landlord. Willingness to pay for rent depends on the racial composition.
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White Flight and Racial Segregation Rent in the housing market # of black families Rent paid by a black family Rent paid by a white family Total rent 0- 1 0 0 8 0 0 1 110 105 845 2 115 890 3 120 100 860 4 90 800 5 75 725 69 0 7 5 6 9 0 78 5 7 0 6 6 5 88 0 - 6 4 0 Table 3.1 Black families are willing to pay more. Both black and white prefer racial integration. Black families are willing to pay more. Both black and white prefer racial integration.
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White Flight and Racial Segregation For each landlord, renting to black families is a dominant strategy.
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This note was uploaded on 07/17/2008 for the course ECON 601 taught by Professor Yang during the Spring '08 term at Ohio State.

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Chapter-3 - Chapter 3:Eliminating the Impossible "How often...

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