ECO 3153 Lecture Notes - Lecture 2: Nash Equilibrium, Game Players, Best Response

• School: University of Ottawa
• Department: Economics
• Course: ECO 3153
• Professor: Paul Alexander Haslam

Document Summary

In a strategic setting, a person may not always have an obvious choice of what is best. May depend on the actions of another person. Using game theory to analyze an economic situation. Results in a prediction about what will happen. A game is an abstract model of a strategic situation. Have the ability to choose from among a set of possible actions. Strategy: each course of action open to a player. It may be a simple action or a complex plan of action. Si is the set of strategies open to player i si is the strategy chosen by player i, si si. Payoffs are measured in levels of utility obtained by the players. Players are assumed to prefer higher payoffs to lower ones u1(s1 , s2) denotes player 1"s payoff assuming she follows s1 and player 2 follows s2 u2(s2 , s1) would be player 2"s payoff under the same circumstances.