ECON 1000 Lecture Notes - Lecture 15: Nash Equilibrium, Normal-Form Game, Demand Curve

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Gordana Colby

Document Summary

Game theory: tool for studying strategic behavior, which is behavior that takes into account the expected behavior of others and the mutual recognition of interdependence. If one confesses, he will get a 1-year sentence for cooperating while his accomplice will get a 10-year sentence for both crimes. In this cases there are two possible actions: confess to the larger crime, deny having committed the larger crime. 2 players and 2 actions = 4 possible outcomes: both confess, both deny, art confesses and bob denies, bob confesses and art denies, payoffs. Payoff matrix: table that shows the payoffs for every possible action by each player for every possible action by the other player: outcome. If a player makes a rational choice in pursuit of his own best interest, he chooses the action that is best for him, no matter what action the other play does (this is an equilibrium -nash equilibrium)