lecture 9 Flashcards
simultaneous single shot (single move games)
simple dominant strategy games 2x 2
best response behaviour
nash equilibrium
cooperation
rational agent
benefitrs for themselves only
nash equilibirum
if each player has chose a strategy - an action plan based on what has happened so far in the game - and no one can increase one’s own expected payoff by changing one’s strategy while the other players keep theirs unchanged, then the current set of strategy choices constitutes a nash eqilibrium whihc is the best rational decision
they Y takes first place
always
the chicken game
1) winner or loser 2 nash but at least they didnt ‘die’ (the ones that bottom left and top right)
2) each prefers different Nash
3) one ‘off equilibrium’ is worse for both
4) the other ‘off equilibrium’ is better for the ‘loser’ cuz at least they didnt go negative
battle of sexes game
1 ) 2 nash with 2 different favourite equilibriums ( winner and loser situations)
2) the off equilibrium outcomes are worse for both than the nash ( the top left and bottom right is nash)
what is backwards induction
= firms consider the decision in the last round of the game and then backwards throught the game, thinking the likely outcomes in the earlier rounds
Sequential games - take turns
importance of timing
-simple decision tress 2 firms 2 options
-first mover advantage
-more complex decision tress with multiple firms and/or multiple options
importance of threats and promises
- reputation credibility affects the game and the decisions
what is grim trigger strategy and tit for tat strategy
grim trigger strategy = once player observes the rival has broken some agreed behaviour, it will never cooperate with them again
tit for tat strategy = firms will make an aggressive move only if the rival does so first, if rival knows this, they will be less likely to make an initial aggressive move
Repeated simulataneous games
infinitely repeated games
grip trigger strategy
-tit for tat strategy
finitely repeated games - end round
-strategy in the last round of the game
- backwards inductions
- nash equilibrium
