Lecture 27 - Political Science C135 Economics C110...

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Political Science C135 Economics C110 Professor Robert Powell 12/2/10 Lecture 27 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy, or illegally distribute (electronically or otherwise) these notes. Our student-run, non-profit program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. DO NOT COPY Sharing or copying these notes is illegal and could end note taking for this course. ANNOUNCEMENTS The final is Tuesday, December 14 th at 3-6 p.m. in Wheeler Auditorium. I have office hours next Wednesday from 2-3:30 pm and no regular office hours. This is our last formal meeting here. I’ll quickly cover ideas we’ve talked about since the midterm then open it up for questions. I’ve posted finals from the last few years online, you should expect exactly the same format and instructions, although maybe not exactly the same number of questions. This is open book and open note. As with the midterm, I’ll try to have enough space for people to write their answers on the exam, but you can bring a blue book for extra room. I’d bring a calculator as an insurance policy if I were you, but you could probably do it without. Student : Is it cumulative? Yes, you are responsible for all the material, but the stuff we talked about at the end built on stuff we talked about early on. So if I’m trying to assess if you know NE, I can ask you about SPE. Most questions will focus on the latter part of the course. One tool we haven’t used much after the midterm is mixed strategies, but that’s a very important part, so make sure you’re on top of that. LECTURE These are topics I’ll remind you of: complete information bargaining, repeated games, asymmetric information games, signaling games. Complete information bargaining is fraught with both conflict and cooperation. If we can reach an agreement, there’s more stuff to be divided because we can produce more or burn up less. Of those games, however, we each want the entire pot. So bargaining is over how to divide the pot. With complete information, we saw that typically bargaining never breaks down and settles without any haggling. Basically, the first offer is accepted, because the offerer knows exactly what he needs to offer to buy a yes. It’s worth it to the offerer to buy a yes rather than to have no agreement. There’s no risk-return tradeoff with complete information. Two extremes in that setting are take it or leave it games (or ultimatum games) and extended bargaining games. The former is where there’s an offer on the table you have to accept or reject. That situation is the most asymmetric when it comes to bargaining power. The optimal offer is 0 for you and 100 for me, and you’re indifferent and so you’ll say yes. All the bargaining surplus goes to the offerer. The other extreme is bargaining that could go on for a long time. We saw that as long as the players are
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This note was uploaded on 02/06/2012 for the course ECON 100A taught by Professor Woroch during the Fall '08 term at Berkeley.

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Lecture 27 - Political Science C135 Economics C110...

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