ec101F10L5_101012 - Economics 101, UCLA Fall 2010 Jernej...

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Unformatted text preview: Economics 101, UCLA Fall 2010 Jernej Copic Lecture 5, 10/12/10. Subgame-perfect Nash equilibrium and Nash equilibrium. Holed in his little Hollywood apartment, Jeremiah was still pondering his possibilities regard- ing his meeting with No1. He recalled that if No1 didnt call, they would effectively be playing a simultaneous-moves game in which each of them would have two actions (cab and Down- town for No1; taxi and UCLA for Jeremiah). Then he also recalled that in a sequential game, if No1 did call, No1 would have 2 pure strategies, while Jeremiah would have 4 pure strategies, { ( taxi | cab,taxi | Downtown ) , ( taxi | cab,UCLA | Downtown ) , ( UCLA | cab,taxi | Downtown ) , ( UCLA | cab,UCLA | Downtown ) } . So he thought a bit further. What about if I just forgot about the fact that if he calls, we move in a sequence, and I just wrote this game down in the matrix form with these four strategies for myself as player 2? - I mean, I could just re-name them into { a 2 , 1 ,a 2 , 2 ,a 2 , 3 ,a 2 , 4 } and pretend that this is just some sort of a simultaneous game where No1 has 2 actions { a 1 , 1 ,a 1 , 2 } , and I have these 4 actions. After all, when No1 calls, I can just tell Clodoveo to pick up the phone and pretend it is the voicemail on which the message is recorded describing which of the 4 strategies I will be playing. Then Clodoveo will suggest No1 an action, such that the two, mine and No1s make a Nash equilibrium of...
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This note was uploaded on 10/23/2010 for the course ECON 101 taught by Professor Buddin during the Fall '08 term at UCLA.

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ec101F10L5_101012 - Economics 101, UCLA Fall 2010 Jernej...

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