ECON 200 Lecture Notes - Lecture 12: Strategic Dominance, Word Game, Nash Equilibrium
28 Oct 2018
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Document Summary
People behave rationally when they look at the trade-o s they face and pursue their goals in the most e ective way possible. To economists, games are not just recreational pursuits like chess, monopoly, or poker; instead, games are situations in which players pursue strategies designed to achieve their goals. Economists use the word game to refer to any situation involving at least two people that require those involved to think strategically. The study of how people behave strategically under di erent circumstances is called game theory. (cid:12254) behaving strategically involves acting to achieve a goal by anticipating the interplay between your own and others" decisions. All games share three features: rules, strategies, and payo s. (cid:12254) (cid:12254) (cid:12254) Rules de ne the actions that are allowed in a game. In chess, for example, each type of piece isallowed to move only in certain directions. In real life, people"s behavior is constrained by laws both legislated and natural.
