Lecture 22 - Economics 101A (Lecture 22) Stefano DellaVigna...

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Economics 101A (Lecture 22) Stefano DellaVigna November 17, 2009
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Outline 1. Dynamic Games 2. Oligopoly: Stackelberg 3. General Equilibrium: Introduction 4. Edgeworth Box: Pure Exchange
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1D y n a m i c G a m e s Nicholson, Ch. 8, pp. 255-266 ( better than Ch. 15, pp. 449—454, 9th) Dynamic games: one player plays after the other Decision trees Decision nodes Strategy is a plan of action at each decision node
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Example: battle of the sexes game She \ He Ballet Football Ballet 2 , 10 , 0 Football 0 , 01 , 2 Dynamic version: she plays f rst
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Subgame-perfect equilibrium. At each node of the tree, the player chooses the strategy with the highest payo f , given the other players’ strategy Backward induction. Find optimal action in last pe- riod and then work backward Solution
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Example 2: Entry Game 1 \ 2 Enter Do not Enter Enter 1 , 11 0 , 0 Do not Enter 0 , 50 , 0 Exercise. Dynamic version. Coordination games solved if one player plays f rst
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Can use this to study f nitely repeated games Suppose we play the prisoner’s dilemma game ten times.
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This note was uploaded on 09/02/2010 for the course ECON 101a taught by Professor Staff during the Fall '08 term at University of California, Berkeley.

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Lecture 22 - Economics 101A (Lecture 22) Stefano DellaVigna...

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