MARKET 1 Lecture Notes - Lecture 20: Oskar Morgenstern, Nash Equilibrium, Normal-Form Game
Document Summary
Interdependence, decision making, theory of games principles of economics (ch. 9) 05/11/10. History: theory of games and economics behaviour: written by john von neumann and oskar. Morgenstern and published in 1944: nash equilibrium: established by john nash in the 1950s (equilibrium in game: an outcome that is stable and predictable given the motives of and constraints facing the players) In order to achieve that a need to be able to penalize players who defect emerges. Difficult if the player just interact once with each other. Repeated prisoner s dilemma: standard prisoner s dilemma that confronts the same players many times: tit-for-tat: first time you interact you cooperate (opponent can defect); in each subsequent you simply do what persons did in the previous interaction. Leads to cooperation sustained by tit-for-tat: players need to be able to remember, fear of retaliation that prevents people from defecting, getting interesting if you have a point system after n-trials and then compare cooperation with pure defect.
