Game_Theory_Revision - Game Theory_Revision Lecture 21...

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Unformatted text preview: Game Theory_Revision Lecture 21 Dominant Strategy Firm B Advertise Don’t Advertise Advertise 10, 5 15, 0 Firm A Don’t Advertise 6, 8 10, 2 One Dominant Strategy Firm B Advertise Don’t Advertise Advertise 10, 5 15, 0 Firm A Don’t Advertise 6, 8 20, 2 Nash Equilibrium Firm 2 Crispy Sweet Crispy Firm 1 -5, -5 10, 10 Sweet 10, 10 -5, -5 Maximin Strategy Firm 2 Don’t invest Invest Don’t invest Firm 1 0, 0 -10, 10 Invest -100, 0 20, 10 Mixed Strategy Firm 2 Q=10 30, 30 Firm Q=10 1 40, 60 Q=20 50, 35 20, 20 Sequential Games • Players move in turns: Advantage of moving first • Extensive form of games: Game trees • If Player A moves first, it has to make credible threat to Player B to deter entry or earn higher payoff: Strategic Move Entry Deterrence Potential Entrant (X) Enter Stay out High price (accommodation) 50, 20 150, 0 Incumbent (I) Low price (warfare) 70, -10 130, 0 Entry Game Backward Induction Other Nash Equilibria • Beach Location Game • Auctions – Types – Bidding is truthful: English and second price sealed bid – Bidding is not truthful: Dutch and first price sealed bid – Collusion ...
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Game_Theory_Revision - Game Theory_Revision Lecture 21...

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