{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Class_9

# Class_9 - GameTheory Lecture 9 Outline Today Stackelberg...

This preview shows pages 1–9. Sign up to view the full content.

Econ 171 – Introduction to  Game Theory Lecture 9

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Outline Today: Stackelberg example Simple bargaining models Dictator game Ultimatum game Alternating offers game Trust game (if time) Tuesday: Repeated games Wednesday: Exam 2
Stackelberg duopoly example Sequential quantity competition Consider two firms: Firm 1 the industry ‘leader’, and Firm 2 is the ‘follower’ because it observes what Firm 1 chooses, then makes its choice. Strategy spaces: Player 1: Player 2: Linear market demand: P=28-4Q Constant marginal cost: c=4

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Stackelberg duopoly example Solving using backwards inductions : Write the payoff functions. Find the Firm 2’s strategy in the subgame. Looking ahead, Firm 1 anticipates Firm 2’s best- response strategy in the subgame- incorporate this information into Firm 1’s payoff function. Find Firm 1’s NE strategy/choice of q.
Stackelberg duopoly example What will Firm 1’s quantity be? a) 3/2 b) 1 c) 4 d) 3 e) ?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Stackelberg duopoly example What will Firm 2’s quantity be? a) 3/2 b) 1 c) 4 d) 3 e) ?
Stackelberg duopoly example What will Firm 2’s quantity be? a) 3/2 b) 1 c) 4 d) 3 e) ? The SPNE will be ________

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Bargaining The standard bargaining model consists of two main stages. 1 st : Does the bargain happen? In other words, is their benefit to be gained at all by making a trade/deal/contract? Yes, as long as the total value of the deal is greater than the total default value if no deal where to happen. e.g. A trade can 'create' value or utility that did not exist
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 27

Class_9 - GameTheory Lecture 9 Outline Today Stackelberg...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online