Documente Academic
Documente Profesional
Documente Cultură
Facebook
(https://www.facebook.com/economicshelp.org) " RSS
(https://www.economicshelp.org/blog/feed) # Follow
(/)
@economicshelp (https://twitter.com/economicshelp)
$ Basket (/cart/)
Shop (https://www.economicshelp.org/shop/)
Contact (https://www.economicshelp.org/contact/)
UK economy (https://www.economicshelp.org/stats)
Game study is the study of strategic interaction where one player’s decision depends on what
the other player does. What the opponent does also depends upon what he thinks the first
player will do.
A DOMINANT strategy occurs when there is an optimal choice of strategy for each player no
matter what the other does.
P2
LEFT RIGHT
UP 8,3 5,4
The unique equilibrium is (up, right). This is despite the fact that (down, left) is pareto superior.
PIGLET
Nash Equilibrium
There are many games which don’t have a dominant strategy.
Definition: A Nash equilibrium occurs when the payoff to player one is the best given the
other’s choice.
P2
LEFT RIGHT
UP 5,4 3,10
P1
DOWN 9,2 0,1
If P1 goes UP, P2 prefers right since 10>4. But if P1 goes down then P2 prefers left since 2>1. If
P2 goes left then P1 goes down since 9>5. If P2 goes right then P1 goes UP since 3>0
Player B
Confess Deny
Confess -3,-3 0,-6
Player A
Deny -6,0 -1,-1
However if they are repeated a finite number of times then there will be an incentive to cheat. If
the game is played 10 times then the player will defect on the 10th round so why cooperate. So
therefore you may as well defect on round 9 and so round 8 as well
If it is played an infinite number of times then it will be different. The best strategy then is to play
tit for tat. If a player defects in one round you retaliate in the next round. In other words you do
what ever your opponent does and this is an incentive to enforce the cartel.
However, if the incumbent can give a credible threat that he will fight then he may be able to
persuade the entrant to stay out. He could do this by investing in extra capacity, which would
give him a bigger payoff in a price war. This would deter entry. So although the monopolist
would never use this he would prevent entry.
Revision Guides
(https://www.economicshelp.org/shop/revision-guide/)
New syllabus
(https://www.economicshelp.org/shop/as-revision-guide/)
AS-Level Revision guide
(https://www.economicshelp.org/shop/as-revision-guide/) £5.00
New Syllabus
Recent Posts
(https://www.economicshelp.org/blog/tag/uk-economy/) unemployment
(https://www.economicshelp.org/blog/tag/unemployment/) us economy
(https://www.economicshelp.org/blog/tag/us-economy/) wages
Recommended Reading
Selected Posts
Economic History
Causes of Wall Street Crash 1929 (https://www.economicshelp.org/blog/76/economics/wall-street-crash-
1929/)
Causes of Great Depression (http://econ.economicshelp.org/2008/10/causes-of-great-depression.html)
UK economy in 1920s (https://www.economicshelp.org/blog/5948/economics/uk-economy-in-the-
1920s/)
UK Economy of 1970s (http://econ.economicshelp.org/2010/02/economy-of-1970s.html)
UK Economy - 1980s (https://www.economicshelp.org/blog/630/economics/economy-in-1980s/)
Keynesian Economics (https://www.economicshelp.org/blog/6801/economics/keynesian-economics/)
Popular posts
The problem of printing money (https://www.economicshelp.org/blog/634/economics/the-problem-
with-printing-money/)
The importance of economics (http://econ.economicshelp.org/2008/06/importance-of-economics.html)
Understanding exchange rates (https://www.economicshelp.org/blog/749/economics/understanding-
exchange-rate/)
10 reasons for studying economics (http://econ.economicshelp.org/2007/08/top-10-reasons-for-
studying-economics.html)
Impact of immigration on UK economy (https://www.economicshelp.org/blog/6399/economics/impact-
of-immigration-on-uk-economy/)
Sections
Microeconomics (/microessays/)
Macroeconomics (/macroeconomics/)
Labour Markets (https://www.economicshelp.org/blog/category/labour-markets/)
You are welcome to ask any questions on Economics. I try and answer on this blog.
© copyright EconomicsHelp.org 2016. All rights reserved | Contact (/contact/) | Privacy Policy and Cookies
(/help/privacy/) | Site by HappyKite (http://happykite.co.uk)