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Class_15 - Econ171Introductionto GameTheory Lecture 15...

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Econ 171 – Introduction to  Game Theory Lecture 15
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Outline Today: Bayes’ rule - Juries example Intro to Perfect Bayesian Equilibrium Problems with subgame perfection Defining perfect Bayesian equilbrium Tuesday: Solving for perfect Bayesian equilibrium Wednesday: Class wrap-up
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Social choice and mechanism design Players make a collective decision, such as whether or not to provide a public good, and if so, how much; or whether to convict defendant in a trial. These types of settings are social-choice problems. Common features of social-choice problems: A group of people must make a collective decision, the outcome of which affects everyone. All players have private info about their personal costs and benefits of related to the decision. The challenge faced is to combine and process all of the private information that is held by all the individuals so that the group can make a decision. This process is called information aggregation .
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Social choice and mechanism design A mechanism is a rule that determines how players can communicate and how their decision is determined. “Incentive schemes”. Key issue in social-choice problems is how does the design of the mechanism affect the outcome of the decision? Specifically, what is the optimal mechanism and can one be found that achieves the social objective (e.g. maximizing social welfare).
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An aside. ..
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Given we have a belief about another player's type, how do we incorporate new information to update existing beliefs? A prior belief is the existing belief about the actual state, often predetermined by Nature. Players receive signals which give them new information regarding the actual state. Players reevaluate their beliefs in light of new information.
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Class_15 - Econ171Introductionto GameTheory Lecture 15...

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