Economics 202: Intermediate Microeconomic Theory
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Transcript of Economics 202: Intermediate Microeconomic Theory
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Economics 202: Intermediate Microeconomic Theory
1. HW #6 on website. Due Tuesday.
2. Second test covers up through today’s material, and will be “pseudo-cumulative” (to be explained).
![Page 2: Economics 202: Intermediate Microeconomic Theory](https://reader035.fdocuments.net/reader035/viewer/2022072014/56812d18550346895d92090f/html5/thumbnails/2.jpg)
Game Theory• “The Dating Game”
– Multiple Nash equilibria
– Nash equilibrium concept loses appeal
• “Copycat Game”– No Nash equilibrium
– Players want to outguess the other
– Introduce mixed strategies (in contrast to pure strategies)
Timing
Static Nash Equilibrium
Information
Dynamic
Complete Incomplete
• Mixed Strategy = a probability distribution over some or all of a player’s pure strategies
• Mixed strategies can add Nash equilbria
• Result: Any game with finite # players who have finite # pure strategies has a Nash equilibrium (possibly utilizing mixed strategies)
Backward Induction
Bayesian Nash Equilibrium
Perfect BayesianEquilibrium
2, 1 0, 0
0, 0 1, 2Chicken
Steak
Red WhitePat
Chris
Jack
Dating Game
-1, 1 1, -1
1, -1 -1, 1
Outside
Outside
InsideJill
InsideCopycat Game
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Game Theory• Dynamic, complete 2-player sequential move game
• Order of play– Player 1 chooses action a1
– Player 2 observes a1 and then chooses a2
– Players receive their payoffs U1(a1,a2) & U2(a1,a2)
• Examples– Stackelberg-version of Cournot duopoly
– Trust Game -- equilibrium?
Timing
StaticNash Equilibrium
Information
Dynamic
Complete Incomplete
• Dynamic, simultaneous move (or infinite horizon) games requires an extension of backward induction called subgame-perfect Nash equilibrium
Backward Induction
Bayesian Nash Equilibrium
Perfect BayesianEquilibrium
1, 1 -1, 2
0, 0 0, 0Not trust
Trust
Honor BetrayPlayer 2
Player 1
Player 1
Trust Game(normal form)
Honor
Not trust
BetrayPlayer 2
Trust
0,0
1,1 -1, 2
Trust Game (extensive form)
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Game Theory• “The Dormitory Game”
– Write extensive form if simultaneous game
– Write extensive & normal forms if A chooses first 6, 3 6, 4
5, 4 7, 5Softly
Loudly
Loudly SoftlyB
A
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Game Theory• “Vote by Alternating Veto”
– Player 1 prefers X to Y to X, Player 2 prefers Z to Y to X
YXX YXY YZX YZY ZXX ZXY ZZX ZZY
X 0,2 0,2 0,2 0,2 1,1 1,1 1,1 1,1
Y 0,2 0,2 2,0 2,0 0,2 0,2 2,0 2,0
Z 1,1 2,0 1,1 2,0 1,1 2,0 1,1 2,0
• Find Nash equilibria and subgame perfect Nash equilbria