# Menu_12_Oct_10 - b Nash equilibrium when A’s choice is...

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TODAY’S MENU: Tuesday 12 October 2010 I. BUSINESS A. Practice Problems 1. Chapter 11: 2-10, 14-16 B. Second Exam: Next time II. SUBSTANCE A. Strategic interaction, economist style: Game Theory 1. Types of Games a. Simultaneous-move: one in which the two parties make their decisions independently and their decisions are revealed at the same time i.e. Final Jeopardy b. Sequential-move: players involved take turns i.e. Chess, auctions 2. More Types of Games a. One-time: game only played once i.e. penalty kick soccer b. Repeated: games that could be simultaneous or sequential and game is played again i.e. trade negotiations 3. Basics: One-time, simultaneous-move game 2 players 2 moves a. Payoff matrix: a matrix of possible results

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Unformatted text preview: b. Nash equilibrium: when A’s choice is optimal given B’s choice and B’s choice is optimal given A’s choice c. Dominant strategy equilibrium: strategy which is better than the other strategy no matter what the opponent does. A’s choice is optimal regardless of B’s choice. AND B’s choice is optimal regardless of A’s behavior d. Example 4. Prisoners’ Dilemma a. Payoff matrix b. Equilibrium c. Pareto efficient/inefficient d. Example 5. Even more games a. Examples 6. Auctions a. Types i. Ascending ii. Descending iii. 1 st-Price Sealed-Bid iv. 2 nd-Price Sealed-Bid b. Strategies 7. Conclusions III. NEXT TIME A. Second exam over Chapters 8, 9, 10, 11...
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Menu_12_Oct_10 - b Nash equilibrium when A’s choice is...

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