lecture6 - Game Theory Mike Shor Lecture 6 ", "...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Game Theory “Доверяй, Но Проверяй” (“Trust, but Verify”) - Russian Proverb (Ronald Reagan) Mike Shor Lecture    6
Background image of page 1

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

View Full DocumentRight Arrow Icon
Repeated Interaction Review Simultaneous games Put yourself in your opponent’s shoes Iterative reasoning Sequential games Look forward and reason back Sequentially rational reasoning Outline: What if interaction is repeated? What strategies can lead players to cooperate? Mike Shor 2
Background image of page 2
The Prisoner’s Dilemma Mike Shor 3 Firm 2 Low High Firm 1 Low 54 , 54 72 , 47 High 47 , 72 60 , 60 Equilibrium:  $54 K Cooperation:  $60 K
Background image of page 3

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

View Full DocumentRight Arrow Icon
Prisoner’s Dilemma Private rationality collective irrationality The equilibrium that arises from using dominant strategies is worse for every player than the outcome that would arise if every player used her dominated strategy instead Goal: To sustain mutually beneficial cooperative outcome overcoming incentives to cheat ( A note about tacit collusion ) Mike Shor 4
Background image of page 4
Moving Beyond                                the Prisoner’s Dilemma Why does the dilemma occur? Interaction No fear of punishment Short term or myopic play Firms: Lack of monopoly power Homogeneity in products and costs Overcapacity Incentives for profit or market share Consumers Price sensitive Price aware Low switching costs Mike Shor 5
Background image of page 5

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

View Full DocumentRight Arrow Icon
Altering Interaction Interaction No fear of punishment Exploit repeated play Short term or myopic play Introduce repeated encounters Introduce uncertainty Mike Shor 6
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 24

lecture6 - Game Theory Mike Shor Lecture 6 ", "...

This preview shows document pages 1 - 7. Sign up to view the full document.

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