Mike Shor Lecture 13
"Necessity never made a good bargain."
- Benjamin Franklin
Allocation of scarce resources
buyers & many sellers traditional markets buyers & one seller auctions buyer & one seller bargaining
Mike Shor Lecture 12
"Everything is worth what its purchaser will pay for it."
- Publilius Syrus (Maxim 847, 42 B.C.)
Sources of Uncertainty
Private Value Auction
Difficult to lose money Do not bid more than your value (or less than your cos
Mike Shor Lecture 11
"A cynic knows the price of everything and the value of nothing."
- Oscar Wilde, Lady Windemere's Fan
What is an Auction? auction
1. 2. A public sale in which property or merchandise are sold to the highest bidder. A marke
Mike Shor Lecture 9
"I like work. It fascinates me. I can sit and look at it for hours."
- Jerome Klapka Jerome
Strategic Manipulation of Information
Strategies for the less informed
Strategies for the more informe
Mike Shor Lecture 8
"The power to constrain an adversary depends upon the power to bind oneself."
- Thomas Schelling
Credible commitments require
Severe enough punishment to change behavior Irreversible and clear actions
Mike Shor Lecture 7
"The difference between genius and stupidity is that genius has its limits."
- Albert Einstein
Punishment and Credibility
Cooperation requires sacrificing immediate profits for a future relationship The sacrifice is
Mike Shor Lecture 6
", " ("Trust, but Verify")
- Russian Proverb (Ronald Reagan)
Put yourself in your opponent's shoes Iterative reasoning
Look forward and reason back Sequentiall
Mike Shor Lecture 5
"I used to think I was indecisive but now I'm not so sure."
Predicting likely outcome of a game Sequential games
forward and reason back for simultaneous best replies
Mike Shor Lecture 3
"Loretta's driving because I'm drinking and I'm drinking because she's driving."
- The Lockhorns
Understanding the game Noting if the rules are flexible Anticipating our opponents' reactions Thinking one step ahead
Mike Shor Lecture 2
"I don't skate to where the puck is, I skate to where it's going to be."
- Wayne Gretzky
Defining the Game
Game theory is a description of strategic interaction between mutually aware players You are self-intereste