ECON 1 Lecture Notes - Lecture 28: Discounting, Subgame, Nash Equilibrium
Document Summary
Normal-form game: model of players choosing their actions simultaneously without observing the moves of their opponents. Players should anticipate future games and use them to enrich the environment for themselves: benefit from using future play to create incentives that constrain their behavior in earlier stages. Multistage games: if players can condition future behavior on past outcomes then this may lead to richer set of self-enforcing outcomes. Multistage game: finite sequence of normal-form stage-games, in which each stage-game is an independent, well-defined game of complete but imperfect information (a simultaneous-move game). Stage-games are played sequentially by the same players. The total payoffs from the sequence of games are evaluated using the sequence of outcomes in the games that are played. Each game is played in a distinct period, so that game 1 is played in period t = 1 until period t = T, which will be the last stage in the game.
