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Class_10(2) - Econ 171 – Introduction to Game Theory...

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Unformatted text preview: Econ 171 – Introduction to Game Theory Lecture 10 Today Repeated games & reputation Finite and 'stage' games 2-stage game Infinite games Repeated games As in the bargaining model, certain static games may be played multiple times. Provide a richer game environment by allowing cooperation, reputation, retribution, patience. Actions in a single static game may be unreasonable, not telling us much about behaviors. Use repeated games to explain strategies and behavior previously consider non-optimal in a single simultaneous games. Opportunity to analyzing more sophisticated or realistic interactions. Repeated games By assumption, single period static games are played in a vacuum. Decisions in future game play depend on a history of interactions. i.e. Repeated games are not only about what has happened in the past, but also what will happen as a result of the interactions. Nash equilibrium in stage games may be inefficient. In repeated games, cooperation/higher outcomes are possible because one can build a reputation and condition on the reputation of others. Repeated games In a repeated game, each period the players play a “stage game” which means they play a single static game. They choose their actions simultaneously and independently, then move to the next period. T periods; players have perfect recall and perfect information . Important: while we know the period we are in and the results of the previous stages, individual stages are not played sequentially . Game payoffs are the sums of the players’ outcomes in each stage game. Finite repeated games Game trees and strategy spaces can be intractably large in finite games. For example, in a simple 2-stage repeated Prisoners’ Dilemma the strategies are: 1 st stage: {C,D} & {c,d} 2 nd stage: { (C’D’,C’D’’,C’D’’’,C’D’’’’), (C’’D’,C’’D’’,C’’D’’’,C’’D’’’’),...
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This note was uploaded on 11/03/2011 for the course ECON 1171 taught by Professor Bof during the Spring '11 term at UCSB.

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Class_10(2) - Econ 171 – Introduction to Game Theory...

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