Static or Simultaneous Games
T.1. Normal Form.
The elements of a game
Simultaneous games
Each player chooses an action without
knowing what the others choose.
The players move
simultaneously
Three elements:
Players
Possible strategies
Payoffs
2
Simulta
Dynamic Games
5. Negotiations
Negotiations
Well study negotiation processes as a kind of DG. For
instance:
Price negotiation between sellers and buyers.
Wage negotiation between unions and firms.
A treaty negotiation between countries.
These processes
STATIC GAMES: LECTURE 4
CONTINUOUS VARIABLES AND
ECONOMIC APPLICATIONS
CONTINUOUS VARIABLES
In many games, pure strategies that players can choose are not
only 2, 3 or any other number but sometimes there are endless
possibilities
Consider two oligopolist
Repeated Games
2. Games repeated
infinitely many times
We know that
In a finitely repeated game with just one NE in
the stage game, by backward induction we
observe:
Period T: there are no incentives to cooperate.
No future losses to worry about .
Perio
Dynamic Games
1. Dynamic Games with Perfect
Information
Dynamic Games
Games in which a player must make a
decission after knowing (part of) the past play,
in particular, what some other player did in
the past.
Mathematical model of the game: extensive
f
Static games
3. Mixed strategies: when the only
good strategy is not to have one
The need of mixed strategies
We have seen games with no Nash
equilibrium in pure strategies (e.g., Matching
pennies)
It is easy to see that in this game the best
strategy i
Repeated games
1. Finitely repeated games
1
Finitely repeated games
A finitely repeated games is a dynamic game in
which a simultaneous game (the stage game) is
played finitely many times, and the result of each
stage is observed before the next is playe
Bayesian Games
2. Economic applications
Economic applications
Auctions with asymmetric information about valuations.
1.
2.
First Price and Second Price Auctions.
Well find BNE in both types of auctions. To facilitate the analysis
we will focus on equilib
Bayesian games
1. Types, Beliefs and
Bayesian Equilibrium
Recall: static game with
complete information
Players
Strategies (actions)
Payoffs or preferences for each strategy
combination
All of the above is common knowledge
among the players.
The Bayes
Static games
Lesson 2: Solution Concepts
Normal form games
Static or simultaneous game: Each player takes their
action without knowing the choice the others make.
Elements of the simultaneous game:
a) Players set: N = cfw_1, . . . , n
b) Strategies (act