Diversion - Speak - PowerPoint PPT Presentation

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Diversion - Speak

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  1. Game - Speak Noncooperative games Players Rules of the game Order (who chooses when) Chance (moves by nature) Information set (who knows what … and when) Payoffs Strategic Form Games Strategies Strategy profiles (possible outcomes)

  2. More Game - Speak • Extensive Form Games  Decision Trees • If – then strategies • Backwards induction • Dominance: strict / weak • Iterated dominance • Constant Sum Games – Zero Sum Games • Prisoner’s Dilemma • Nash Equilibrium • Easy coordination / Chicken • Mixed Strategies

  3. DominanceHarry or Condi on Cover?

  4. Iterated DominanceHarry, Condi, or Albie?

  5. Nash Equilibrium • No player by herself can improve her payoff by moving to a different strategy, given the strategies chosen by other players. Nash covers Smith • Pursuit of self-interest by each player on her own won’t result in socially desirable outcome when individuals don’t pay for the harm their actions cause others … when scarce resources are “free.”

  6. Nash EquilibriumPrisoner’s Dilemma

  7. Nash EquilibriumEasy Coordination

  8. Nash EquilibriumChicken

  9. Nash EquilibriumTime and Newsweek Prices Time optimally sets its price, PT PT = $1.50 + .50 PN Newsweek optimally set its price, PN PN = $1.50 +.50 PT • When PT = $3.00, Newsweek wants to set its price to $3.00. • When PN = $3.00, Time wants to set its price to $3.00.

  10. The Bar SceneJohn and Joe Choose

  11. The Bar SceneNash Equilibrium and Mixed Strategies