Game Theory - sequential games

Game Theory - sequential games - 1 Some material adapted...

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Unformatted text preview: 1 Some material adapted from Baye 2002 Sequential Games MANEC 387 Economics of Strategy 2 Some material adapted from Baye 2002 Final player chooses the option that maximizes her payoff The previous player chooses the option that maximizes his payoff conditional on the expected choice of the final player, and so on This is backward induction work backward from the end sub-game, each player makes optimal choices assuming that each subsequent rival chooses rationally The equilibrium is called sub-game perfection Sequential Strategies in the Game Tree 3 Some material adapted from Baye 2002 A Business Situation Barkley has been battling Sharpe in the market for high-end digital recording equipment Most experts agree that the market will ultimately support only one firm, and that the final shakeout will occur this year Industry analysts are waiting for the two firms to announce whether they will be serving the home or professional markets At this years tradeshow in Phoenix (6 months hence), all bets are on Sharpe, which is expected to earn $100 million with its promotion strategy 4...
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This note was uploaded on 03/20/2011 for the course MANEC 437 taught by Professor Benson during the Winter '11 term at BYU.

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Game Theory - sequential games - 1 Some material adapted...

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