ECON 2350 Lecture Notes - Lecture 15: Nash Equilibrium, Strategic Dominance, Extensive-Form Game
7 Jan 2018
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Topic: nash equilibrium u a play of the game where each strategy is a best reply to the other is a. Nash equilibrium. u our example has two nash equilibria; (u,l) and (d,r). U,l) and (d,r) are both nash equilibria for the game. Notice that (u,l) is preferred to (d,r) by both players. To see if pareto-preferred outcomes must be what we see in the play of a game, consider the famous example called the prisoner"s dilemma game. If bonnie plays silence then clyde"s best reply is confess. If bonnie plays confess then clyde"s best reply is confess. So no matter what bonnie plays, clyde"s best reply is always confess. Similarly, no matter what clyde plays, bonnie"s best reply is always confess. Confess is a dominant strategy for bonnie also. So the only nash equilibrium for this game is (c,c), even though (s,s) gives both bonnie and clyde better payoffs.
