ECON 1108 Lecture Notes - Lecture 5: Nash Equilibrium, Renting, Extensive-Form Game

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6 Mar 2019
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Any finite strategy game has a nash equilibrium. If there is no pure strategy, then it is a mixed strategy equilibrium. The arrows point to whichever strategy player 1 or 2 should use. To show a strategy is nash you have to show the payoffs for all players in that strategy. To show a strategy isn"t nash you only need to show one payoff that is higher for one player. When a strategy has to be a complete plan of action that just means you have to pick one. But strategy becomes more complicated when its no longer simultaneous play. First thing we want to do is take a game of perfect information. An entrant firm wishes to enter movie rental business. There is one incumbent firm in the market. I makes threat if you enter i will increase my advertising budget, lower my prices, and smash you . Incumbent on its own is a monopoly, doesn"t want to share.

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