ECON 116A Lecture Notes - Lecture 1: Game Theory, Strategic Dominance, Imperfect Competition
28 Feb 2016
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What is a game: there are many types of games, board games, card games, video games, field games (e. g. football), etc, we focus on games where: There is some choice of action where strategy matters. The game has one or more outcomes, e. g. someone wins, someone loses. Games of pure chance, e. g. lotteries, slot machines. (strategies don"t matter). Games without strategic interaction between players, e. g. solitaire. Why do economists study games: games are a convenient way to model strategic interactions among small numbers of agents, n, monopoly(cid:198)game theory-(cid:198)perfect competition n = 1, 2, 3, 4, , (cid:198) (cid:146, many economic issues involve strategic interactions. Behavior in imperfectly competitive markets, e. g. coca- Behavior in auctions, e. g. , bidders bidding against other bidders who have private valuations for the item. Behavior in economic negotiations, e. g. trade negotiations: game theory is not limited to economics! Also used in biology, computer science, political science, etc. Four elements of a game: the players.
