Simultaneous Move Games II

Simultaneous Move Games II - UNC-Wilmington Department of...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
UNC-Wilmington ECN 321 Department of Economics and Finance Dr. Chris Dumas Discrete Action, One-Shot, Simultaneous Move Games 2 Iterated Dominant Strategy: A non-dominant strategy that maximizes a player's payoff given that other players play dominant strategies. Example "Splitting the Market": Non-cooperative, Simultaneous Move Game where one player has a Dominant Strategy and the other player has an Iterated Dominant Strategy. The outcome of the game is a Nash Equilibrium, but not a Dominant Strategy Equilibrium. Firm B Advertise in Both Markets Focus on Market 2 Firm A Advertise in Both Markets 50, 30 30, 40 Focus on Market 1 20, 20 40, 50 Firm A does not have a dominant strategy. Firm B has a dominant strategy: "Focus on Market 2." If Firm B plays its dominant strategy, then Firm A's best strategy is to play "Focus on Market 1." Hence, the strategy "Focus on Market 1" is Firm A's Iterated Dominant Strategy. The outcome of the game is a Nash Equilibrium, but not a Dominant Strategy Equilibrium. 1
Background image of page 1

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

View Full DocumentRight Arrow Icon
UNC-Wilmington ECN 321 Department of Economics and Finance Dr. Chris Dumas Multiple Equilibria: The outcome of a game in which there is no dominant strategy equilibrium and more than one Nash Equilibrium. Focal Point: A Nash Equilibrium that provides higher payoffs to all players relative to all other Nash Equilibria in a game with multiple equilibria. Example "Floppy Disks": Non-cooperative, Simultaneous Move Game with Multiple Equilibria and a Focal Point. Firm B Produce 5" Disks Produce 3" Disks Firm A Produce 5" Disks 10, 10 -10, -20 Produce 3" Disks -20, -10 20, 20 Neither Firm A nor Firm B has a dominant strategy, so there can be no dominant strategy equilibrium. Can there be a Nash equilibrium? Yes. Can there be more than one Nash Equilibrium, that is, can there be Multiple Equilibria? Yes.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

Simultaneous Move Games II - UNC-Wilmington Department of...

This preview shows document pages 1 - 3. Sign up to view the full document.

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