lecture5

# Lecture5 - Game Theory Mike Shor Lecture 5"I used to think I was indecisive but now I'm not so sure Anonymous Review Predicting likely outcome of a

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Game Theory “I used to think I was indecisive – but now I’m not so sure.” - Anonymous Mike Shor Lecture    5

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Review Predicting likely outcome of a game Sequential games Look forward and reason back Simultaneous games Look for simultaneous best replies What if there are no equilibria? Mike Shor 2
Employee Monitoring Employees can work hard or shirk Salary: \$100K unless caught shirking Cost of effort: \$50K Managers can monitor or not Value of employee output: \$200K Profit if employee doesn’t work: \$0 Cost of monitoring: \$10K Mike Shor 3

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Employee Monitoring Best replies do not correspond No equilibrium in pure strategies What do the players do? Mike Shor 4 Manager Monitor No Monitor Employee Work 50 , 90 50 , 100 Shirk 0 , -10 100 , -100
Mixed Strategies Unreasonable predictors of one-time interaction Reasonable predictors of long-term proportions Outline: Calculating mixed strategies Mixed strategies in practice Reacting to cost increases Mike Shor 5

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Game Winning Goal Mike Shor 6
Soccer Penalty Kicks                                    (Pee Wee League Version) Mike Shor 7 G O A L I E L    R K I C K E R  L  R -1 , 1 1 , -1 1 , -1 -1 , 1

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There are no mutual best responses Seemingly, no equilibria How would you play this game? What would you do if you know that the goalie jumps left 75% of the time? Mike Shor
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## This note was uploaded on 03/04/2012 for the course MGT 425 taught by Professor Shor during the Spring '11 term at Vanderbilt.

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Lecture5 - Game Theory Mike Shor Lecture 5"I used to think I was indecisive but now I'm not so sure Anonymous Review Predicting likely outcome of a

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