ECON 1108 Lecture 1: Econ 1108 Lecture 1
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Can drive through london, can buy a pint in london. Can find oxford street in 2-3 minutes on a to z map. Can put a to z map in pocket. Can"t reject a model because it lacks some features of the system. Only reject a model when it doesn"t work. Model fails: missing vital features like index and street labels. Do not criticize a model because it contains some false assumptions. Models have very different uses, but a model shouldn"t be called wrong or right. If one of the assumptions of your model is that bidders behave strategically, then you have a game theoretic model. Step 3: if the predictions of the theory agree with the outcomes given by your model, that is evidence that your theory has some validity. More than one use for game theory and game theoretic models.
