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June 10, 2021 73347 Game TheoryLecture 15 1 Dynamic Games of Complete Information Dynamic Games of Complete and Perfect Information June 10, 2021 73347 Game TheoryLecture 15 2 Outline of dynamic games of plete information ? Dynamic games of plete information ? Extensiveform representation ? Dynamic games of plete and perfect information ? Game tree ? Subgameperfect Nash equilibrium ? Backward induction ? Applications ? Dynamic games of plete and imperfect information ? More applications ? Repeated games June 10, 2021 73347 Game TheoryLecture 15 3 Today’s Agenda ? Review of previous class ? Subgameperfect Nash equilibrium ? Backward induction ? Stackelberg’s model of duopoly ( of Gibbons, of Osborne) ? Sequentialmove Bertrand model of duopoly (differentiated products) June 10, 2021 73347 Game TheoryLecture 15 4 Dynamic games of plete and perfect information ? Perfect information ? All previous moves are observed before the next move is chosen. ? A player knows Who has moved What before she makes a decision June 10, 2021 73347 Game TheoryLecture 15 5 Strategy and payoff ? A strategy for a player is a plete plan of actions. ? It specifies a feasible action for the player in every contingency in which the player might be called on to act. ? It specifies what the player does at each of her nodes Player 1 Player 2 H T 1, 1 1, 1 H T Player 2 H T 1, 1 1, 1 a strategy for player 1: H a strategy for player 2: H if player 1 plays H, T if player 1 plays T (written as HT) Player 1’s payoff is 1 and player 2’s payoff is 1 if player 1 plays H and player 2 plays HT June 10, 2021 73347 Game TheoryLecture 15 6 Nash equilibrium in a dynamic game ? We can also use normalform to represent a dynamic game ? The set of Nash equilibria in a dynamic game of plete information is the set of Nash equilibria of its normalform ? How to find the Nash equilibria in a dynamic gam