lecture2_Games - INTRO SIMULTANEOUS SEQUENTIAL REPEATED I...

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Unformatted text preview: INTRO SIMULTANEOUS SEQUENTIAL REPEATED I NDUSTRIAL ORGANISATION (2011) T OPIC 2: G AME THEORY Nicolas de Roos 1 1 School of Economics University of Sydney INDUSTRIAL ORGANISATION (2011) TOPIC 2: GAME THEORY INTRO SIMULTANEOUS SEQUENTIAL REPEATED O UTLINE INTRODUCTION Basics SIMULTANEOUS MOVE GAMES Overview SEQUENTIAL MOVE GAMES Overview REPEATED GAMES Overview INDUSTRIAL ORGANISATION (2011) TOPIC 2: GAME THEORY INTRO SIMULTANEOUS SEQUENTIAL REPEATED I NTRODUCTION Oligopoly • small number of firms • could be differentiated or homogeneous product • barriers to entry • strategic interaction between firms is crucial Game theory • analysis of the strategic interaction between agents • the payoff to an agent depends on her own actions as well as those of others We will consider static games of complete information INDUSTRIAL ORGANISATION (2011) TOPIC 2: GAME THEORY INTRO SIMULTANEOUS SEQUENTIAL REPEATED C OMPONENTS OF A GAME • players, i = 1 ,..., n • actions, a , (eg prices or quantities or advertising) • strategies, s • complete contingent plan of action • information available to players • we will assume perfect information • rules of the game • payoffs, π ( s ) INDUSTRIAL ORGANISATION (2011) TOPIC 2: GAME THEORY INTRO SIMULTANEOUS SEQUENTIAL REPEATED R EPRESENTING GAMES normal form representation • payoffs are contained in a matrix of cells • rows correspond to actions or strategies of Player 1 • columns correspond to actions or strategies of Player 2 • in each cell • Player 1’s payoff is on the left • Player 2’s payoff is on the right • usually used for simultaneous move games INDUSTRIAL ORGANISATION (2011) TOPIC 2: GAME THEORY INTRO SIMULTANEOUS SEQUENTIAL REPEATED E XAMPLE : THE GAME OF CHICKEN Two “hoons” speed toward each other on a narrow road. • the first to swerve is a “chicken” • if neither swerves, neither makes it home for dinner FIGURE: Chicken in normal form Driver 1 Driver 2 straight swerve straight- 100 ,- 100 1 ,- 1 swerve- 1 , 1 , INDUSTRIAL ORGANISATION (2011) TOPIC 2: GAME THEORY INTRO SIMULTANEOUS SEQUENTIAL REPEATED R EPRESENTING GAMES extensive form representation • the game is represented by a tree • the order of play is made explicit • nodes represent decisions • branches represent actions • information sets indicate nodes that can’t be distinguished • usually used for sequential move games Can we represent the game of chicken in extensive form?...
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This note was uploaded on 10/28/2011 for the course ECOS 3005 taught by Professor Douglas during the Three '10 term at University of Sydney.

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lecture2_Games - INTRO SIMULTANEOUS SEQUENTIAL REPEATED I...

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