Chapter-10 - Games with Private Information So far we have...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Games with Private Information So far we have assumed that the game is common knowledge to all players: each player knows - Who are playing - What their options are - How they evaluate outcomes In some situations, a player might be uncertain about how the other player evaluates outcomes (payoffs). A player has private information . - At car dealership, you are uncertain about the price that the salesperson is willing to sell. - In setting price, one firm may be uncertain about other firms’ marginal costs. So far we have assumed that the game is common knowledge to all players: each player knows - Who are playing - What their options are - How they evaluate outcomes In some situations, a player might be uncertain about how the other player evaluates outcomes (payoffs). A player has private information . - At car dealership, you are uncertain about the price that the salesperson is willing to sell. - In setting price, one firm may be uncertain about other firms’ marginal costs.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Munich Agreement In 1938, Hitler already annexed Austria. And he demanded Sudetenland of Czech as well. In 1939, British Prime Minster Chamberlain tried to appease Hitler. He signed the Munich Agreement and yield Sudetenland to Germany. But Hitler didn’t stop there, soon he annexed the whole Czech and invaded Poland; World War II broke out. In 1938, Hitler already annexed Austria. And he demanded Sudetenland of Czech as well. In 1939, British Prime Minster Chamberlain tried to appease Hitler. He signed the Munich Agreement and yield Sudetenland to Germany. But Hitler didn’t stop there, soon he annexed the whole Czech and invaded Poland; World War II broke out.
Background image of page 2
The Munich Agreement In deciding whether to sign the agreement, Chamberlain was uncertain about Hitler’s ultimate intentions: - Only seeking additional living space for the German? - More ambitious to rule the whole Europe? In deciding whether to sign the agreement, Chamberlain was uncertain about Hitler’s ultimate intentions: - Only seeking additional living space for the German? - More ambitious to rule the whole Europe? Chamberlain Hitler Concessions 1 ? War No war Stand Firm 3 ? 2 ? Chamberlain Hitler 4 ? Hitler War No war
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Munich Agreement Payoffs if Hitler is amicable Chamberlain Hitler Concessions 1 3 War No war Stand Firm 3 4 2 2 Chamberlain Hitler 4 1 Hitler War No war Hitler’s best response: no war / war. Hitler’s best response: no war / war.
Background image of page 4
The Munich Agreement Payoffs if Hitler is belligerent Chamberlain Hitler Concessions 1 4 War No war Stand Firm 3 2 2 3 Chamberlain Hitler 4 1 Hitler War No war Hitler’s best response: war / war. Hitler’s best response: war / war.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Munich Agreement Suppose Chamberlain believes that Hitler is amicable with probability 0.6, and belligerent with probability 0.4.
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 39

Chapter-10 - Games with Private Information So far we have...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online