CAS EC 101 Lecture Notes - Lecture 22: Strategic Dominance, Nash Equilibrium, Perfect Competition

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

Document Summary

120 (wtp is above 0 until you get to. In equilibrium, after finding out what the other players have done, each player is happy with the strategy that she chose. If there are regrets, then the strategy profile is not an equilibrium. We can think about a nash equilibrium like this: Each player chooses a best response to what she believes will be the strategies of the other players. And her beliefs about the strategies of other players turn out to be correct. A problem with the nash equilibrium concept is that the formation of beliefs about the strategies of other players is not explained. In particular, it isn"t always clear why beliefs about the strategies of other players ought to be correct. If players have incorrect beliefs, there"s no reason that they would choose nash- equilibrium strategies although if players choose strategies that yield a nash equilibrium, they would be likely to stay there.