Coursenotes_ECON301

Egy as 301 defin nition a na equilibr ash rium in

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Unformatted text preview: er 1 can choose T, M, or B with payo being 4 for T 2 for M, and 3 for B. So when p T, a player 2 pla L the be respons from ays est se playe 1 is to pla T. er ay To su ummarize, ayer 1 plays T then pla s ayer 2's bes response is to play L st e L...(T, L). if pla if pla ayer 2 plays L then pla s ayer 1's bes response is to play T st T...(T, L). So th pure stra he ategy pair (T, L) is a m mutual best response a as such is a pure and h strate Nash equilibrium. egy e ONE DOW ONE T GO! WN, TO Now take as giv that pla ven ayer 1 will c choose his p pure strateg as M. W gy What is playe 2's best response to this? er o 302 Hope efully, we can see that when play 1 choos M then player 2's b t yer ses best respo onse is C. Now we ne to chec to see if M is a best response t Player 2 eed ck t to choo osing C...an it is! nd So th pure stra he ategy pair (M, C) is a m mutual best response and as suc is a pure t ch e strate Nash Equilibrium. egy E . WN, E TWO DOW NONE TO GO! Take a couple of seconds to try to find a mutual best respo e o onse to Play 1's yer choic of B and let me kno what you find... ce d ow u TCHING PE ENNIES MAT This game sets up as follo ows: Two friends take a penny i their han and place it either "h in nd e heads up" o "tails up" or ". They have agre to payo as follow y eed offs ws: If, wh they op their ha hen pen ands, the pe ennies are the same s side up then player 1 n gets a dollar fro player 2. om If, wh they op their ha hen pen ands, the pe ennies show opposite sides up th player 2 w hen gets a dollar fro player 1. om s form and th normal fo he orm... Let's represent this game in both the extensive f BAT TTLE OF TH SEXES HE meo arated by m many miles with no way of commu unicating Rom and Juliet are sepa (ther were no cell phones or Blackbe re c s erries in the 18th century!). e The last time that they saw each othe they agre to go out on Satur w er eed rday night but th could not agree to which eve they would attend before they were hey n o ent y sepa arated. 303 Juliet wants to go to the Manchester United gam (soccer = sports, de g me enoted as S) bu she know that Rom wants t go...
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