15 Game Theory

Pareto outcome nashequilibriumistheresultwhenboth

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Unformatted text preview: ose Player 1 is locked into Confessing, Player 2 is better off Confessing. ► So we put a star above Player 2’s Payoff. Player 2 C DNC C ­6 , ­6 0 , ­9 Player 1 DNC ­9 , 0 ­1 , ­1 13 Another Way to Solve a Game ►Suppose Player 1 is locked into Not Confessing, Player 2 is better off Confessing. ►So we put a star above Player 2’s Payoff. Player 2 C DNC C ­6 , ­6 0 , ­9 Player 1 DNC ­9 , 0 ­1 , ­1 14 Another Way to Solve a Game ►Suppose Player 2 is locked into Confessing, Player 1 is better off Confessing. ►So we put a star above Player 1’s Payoff. Player 2 C DNC C ­6 , ­6 0 , ­9 Player 1 DNC ­9 , 0 ­1 , ­1 15 Another Way to Solve a Game ► Suppose Player 2 is locked into Not Confessing, Player 1 is better off Confessing. ► So we put a star above Player 1’s Payoff. ► (Confess, Confess) is a Nash Equilibrium because it has two stars Player 2 C DNC C ­6 , ­6 0 , ­9 Player 1 DNC ­9 , 0 ­1 , ­1 16 Nash Equilibrium vs. Pareto Outcome ► Nash Equilibrium is the result when both players act strategically given what the other is going to do (Confess, Confess). ► Pareto Optimum is the result that benefits both players the m...
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This document was uploaded on 03/23/2014.

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