Jan 11, 2011

Jan 11, 2011 - ʼ s interest& costs& payoffs 1...

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Rent Seeking --> Baumol can be included --> advertising (i.e. Coke v.s. Pepsi) 13% of GDP possibly China ʼ s almost industrial revolution takes away incentive to produce new products Sequential Games Should Charlie Brown (CB) take an investment from Fredo (F), of $100,000 to get $250,000 Game Theory is about context (all about the details of the current situation) First Rule of Strategy: Look ahead and reason back Example: Jake (J) S P Q Total S - CS + PS Q MC D Pro±t MR Deadweight Loss CB $250,000 $250,000 F $250,000 -$100,000 $0 GAME TREES Node You J -$200 -$200 $0 $200 $250,000 $250,000 $100 $100 Honors Contract Abscond Keep Out Invests Enter Keep Out Keep Same Cut Price (1/2)*(100) - (1/2)*(200) = 50 - 100 = -$50 Expected Pro±t --> If true, it would be better to Keep Out; but it ʼ s an erroneous assumption cause you haven ʼ t considered Jake
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Unformatted text preview: ʼ s interest & costs & payoffs. 1 Producer Surplus Ultimatum Game: • there is a Proposer and a Responder; • assume that each person in a game will always looking for their own self-interest Bargaining Games: • (this example is depicted with Ice Cream) • Size = 1, 1/2, 0 _ _ _ 1 ___ ____2 ____ Period: Alice proposes Bob proposes a split (AP) a split (BP) Size = 1 L AP BP AP BP 1 (1) 2 (2/3) 3 (1/3) 4 (0) A = 2/3 B=1/3 A = 1/3 B = 1/3 A = 1/3 B = 0 A = 0 B = 0 When the game goes on for a and odd number of periods, usually the Frst player has the advantage, but this isn ʼ t always the case. You Keep Out Enter $0 $200 $100 $100 ( Bold Payoffs are Jake ʼ s) Jake could incur a loss to maintain a reputation as a tough monopolist, but he may also be irrational...
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This document was uploaded on 04/07/2011.

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Jan 11, 2011 - ʼ s interest& costs& payoffs 1...

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