ECON 1B03 Lecture Notes - Lecture 35: Game Theory, Nash Equilibrium, Strategic Dominance

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Strategic decisions are those in which each person, in deciding what actions to take, Study of how people behave in strategic situations must consider how others might respond to that action. Is a particular game b/w 2 captured prisoners that illustrates why. Often people (or firms) fail to cooperate with one another even when cooperation would cooperation is difficult to maintain even when it is mutually beneficial. Suppose there are 2 criminals - adam and blake. Police have caught them on a weapon"s charge - 1 yr sentence. Police suspect they robbed a bank, but lack evidence - they need one/both to confess or make them better off blame the other. They seperate criminals and offer each of them same deal: If you betray your partner and blame them for bank robbery and your partner says nothing. I"ll let you go free and your partner will get 12 yrs.

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