week2_handout

week2_handout - Econ 101 Microeconomic Theory Professor...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Microeconomic Theory Professor Jernej Copic Week 2 Handout Hyo Sang Kim KEY IDEAS A Nash equilibrium (NE) is stable in that, even if all players revealed their strategies to each other, no player would have an incentive to deviate from his or her equilibrium strategy and choose something else. A Subgame perfect Nash equilibrium (SPNE) is a strategy proFle that is a Nash equilibrium on every proper subgame. A subgame is every subset of the game tree that looks like a game itself. – Backward induction is a shortcut for Fnding the SPNE. (1) Identify the subgames at the bottom of the game tree. (2) ±ind the Nash equilibria on these subgames. (3) Replace the sub- games with the actions and payoffs resulting from Nash equilibrium play on these subgames. (4) Move up to the next level of subgames and repeat the procedure. Extensive form vs Normal form EXERCISES 1. Consider the following two player game in extensive form. 1
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/06/2012 for the course ECON 101 taught by Professor Buddin during the Spring '08 term at UCLA.

Page1 / 3

week2_handout - Econ 101 Microeconomic Theory Professor...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online