CAS EC 101 Lecture Notes - Lecture 24: Matching Pennies, Stackelberg Competition, Subgame

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Michael Manove

Document Summary

Vanessa moves first: she buys a ticket either for football or opera. She shows miguel her ticket so he knows what she has done. Then miguel moves: he buys his ticket either for the football match or opera. What is true about {r, always r}: it is a nash equilibrium. Yes, {r, always r} is a nash equilibrium, but it will not occur if both players are rational. This is because always r is not time-consistent, and a rational miguel would not follow it during the game and vanessa knows, so if she moves first, she"ll choose f even if he says he"ll choose. Each branch of the tree describes an action the player can choose. Each node (where branches meet) describes what a player knows before she moves. A strategy is a complete plan that states what action a player should take at every one of her nodes. Each player"s payoffs are at the bottom of the tree.