Static or Simultaneous Games
T.1. Normal Form.
The elements of a game
Each player chooses an action without
knowing what the others choose.
The players move
Well study negotiation processes as a kind of DG. For
Price negotiation between sellers and buyers.
Wage negotiation between unions and firms.
A treaty negotiation between countries.
STATIC GAMES: LECTURE 4
CONTINUOUS VARIABLES AND
In many games, pure strategies that players can choose are not
only 2, 3 or any other number but sometimes there are endless
Consider two oligopolist
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
Period T: there are no incentives to cooperate.
No future losses to worry about .
1. Dynamic Games with Perfect
Games in which a player must make a
decission after knowing (part of) the past play,
in particular, what some other player did in
Mathematical model of the game: extensive
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
It is easy to see that in this game the best
1. Finitely repeated games
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
2. Economic applications
Auctions with asymmetric information about valuations.
First Price and Second Price Auctions.
Well find BNE in both types of auctions. To facilitate the analysis
we will focus on equilib
1. Types, Beliefs and
Recall: static game with
Payoffs or preferences for each strategy
All of the above is common knowledge
among the players.
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