01:220:102 Lecture Notes - Lecture 21: Jolla, Strategic Dominance, Nash Equilibrium

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Barbara Crockett

Document Summary

Nash equilibrium = situation where none of the players can do better by choosing a different action/strategy: no individual person can change their behavior & get a better outcome. Prisoner"s dilemma game: players: you & josie, strategies: confess or not confess, payoffs: given by matrix. Simultaneous move game: players pick their strategies at the same time. Payoff matrix: represents payoffs for each player for each strategy. If you don"t confess, josie should confess: no matter what josie does, you should confess. Dominant strategy: one player"s best response, regardless of what other player does. Nash equilibrium = when both you & josie confess (from player"s perspective, equilibrium isn"t optimal b/c you are both self-interested & prefer 2 years than 5 yrs) Surf shops & advertising games: not all games have dominant strategies: players: hang ten & la jolla surf, strategies: advertise or don"t, payoffs: given by payoff matrix. If la jolla advertises, hang ten should advertise.