Economics 2129A/B Lecture Notes - Lecture 15: Sequential Game, Nash Equilibrium, Root Mean Square

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Review- a repeated game is: when agents play same static game t times any repeated game is a sequential game. Sequential games one player makes rst move then other acts after. Horace hamilton"s worked in mens clothing for 25 years, has saved 50k and a 500k line of credit at the bank, Horace is considering opening a menswear shop in cathy"s old store game. St horace decides to enter or not then manny sees what horace has decided, if horace chose e, manny has to decide what to do. his choices are: Prey- opens shop and puts everything on sale and tons of stock to sell, strategy occurs until horace goes out of business. Bne- opens store and manny prices as in repeated bertrand nash equilibrium (similar prices each store) decisions if horace doesn"t enter, he gets 0 and manny gets vm (monopoly price) if horace does enter:

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