Pure Strategy Nash Equilibrium
Pure Strategy Nash Equilibrium
A.
You can only get so far with strict dominance-type
reasoning. Backwards induction seems impressive at first, but
it only works for finite games of perfect and complete
information. Very few
Infinitely Repeated Games notes
Infinitely-Repeated Games
A.
Few games literally last forever, but many games always
have a chance to continue. As long as they have that chance,
game theorists call them "infinitely repeated."
B.
With infinite repetition,
Extensive and Normal Forms
Extensive and Normal Forms
A.
Standard consumer choice provides the basic building
blocks: game theory retains the standard assumption that
people maximize utility functions. Slight change: Game
theorists often talk about "payof
Coordination and Ultimatum games notes
Coordination Games
A.
Another game with a high profile in both theoretical and
policy discussions is the Coordination game. Standard
representation:
Player 2
Player
Left
Right
1
Left
3,3
0,0
Right 0,0
5,5
B.
C.
D.
E.
Monopoly and Contestability
Monopoly and Contestability
A.
You have all seen the standard monopoly model. The
monopolist maximizes PQ-TC, and sets MR=MC.
B.
Does this make sense in game theoretic terms?
Sure, this is an equilibrium.
But there is also an e
Mixed Strategy Nash Equilibrium
Mixed Strategy Nash Equilibrium
A.
Talking about "pure strategy" NE strongly suggests a
contrasting concept of "mixed strategy" NE. Instead of just
asking whether any player has an incentive to change
strategies, you could
Subgame perfection
Subgame Perfection
A.
Suppose I threaten to fail any student who leaves early
from any class. If you believe my threat, you will not leave
early, and I will never have to impose my threat. This sounds
like a Nash equilibrium - since I g
Strictly and Weakly Dominant Strategies
Strictly and Weakly Dominant Strategies
A.
So what does game theory claim people do? It begins with
some relatively weak assumptions, then gradually strengthens
them until a plausible answer emerges.
B.
Weakest assu
Reputation notes
Reputation
A.
B.
Cheat
Don't
C.
D.
E.
F.
G.
H.
I.
Economists frequently invoke reputation to explain seemingly
money-losing behavior. Does this make sense?
Yes. The logic of repeated play often works even if there is
some one-shot interac
Backwards Induction notes
Backwards Induction
A.
In any game of complete and perfect information, each node
marks the beginning of what can be seen as another game of
complete and perfect information.
1.
"A game of complete and perfect information is an
e