ECN 100B Lecture Notes - Lecture 7: Best Response, Nash Equilibrium, Strategic Dominance
21 Mar 2018
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Ecn 100b lecture 1 game theory. Useful in economics, but also in law, political science, biology and other subjects. Perfect competition: you cat as a price taker, other firms do not affect you directly, no interaction. (infinite number of other firms) Monopoly: there is just one firm who cares about the market demand, but there are not other firms to care about. (zero other firms) We will see that for imperfect competition, strategic interaction would matter. Example: airline prices on routes where multiple carriers operate. Quantities are in thousands of passengers per quarter. Dominant strategy: a strategy is called a dominant strategy if it creates a higher payoff than any other strategy, for every possible combination of its rival"s strategies. (it must be a best response to all opponent strategies. Not all games would have dominant strategies, but for the games that do have dominant strategies for all players, we can predict the outcome of the game relatively easily.
