ECO206Y1 Lecture Notes - Lecture 4: Subgame Perfect Equilibrium, Chengyu, Nash Equilibrium

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6 Jul 2016
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Two rms decide whether to have advertisements or not. If only one rm is advertising, that rm makes a pro t of 800 dollars minus the cost of the advertisement (which is 200 dollars), and the other rm makes zero pro t. If both rms are advertising, they both make pro ts of 600 dollars minus the cost of the advertisements. Two friends go to a party and decide whether to wear makeup or not. There are two rms a and b and 10 consumers in the market. All the consumers will buy from the rm which o ers a lower price. If the two rms o er the same price, 5 consumers will buy from a and 5 consumers will buy from b. Every student in the class wants to know the answer to a stupid question, but does want to be the one person asking it. N neighbors of 221b baker street heard a gunshot.

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