Economics 2129A/B Lecture Notes - Lecture 8: Coordination Game, Nash Equilibrium, Game Players
12 Mar 2015
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Document Summary
Understanding firms" strategic interactions in one-off situations using the tools of. All static (normal form) games have the same basic ingredients. A set of n >= 2 players (or agents) This is the set of possible decisions (or strategies) each player could choose (eg. A set of possible product prices or advertising expenditures or executive bonuses or job candidates. A payoff function for each agent, which depends on the decisions chosen by all. My payoff depends on the decisions made by everyone in the game (ex. How much you spend on advertising but also how much they spend effects you) An example: a duopoly: two firms selling gasoline on the same corner. Strategy sets: for firm j, it is sj = (0, infinity), the set of prices pj could set agents for its product. Payoff functions: for each firm j , it is firm j"s profits, which are:
