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June 4, 2021 73347 Game TheoryLecture 12 1 Dynamic Games of Complete Information ExtensiveForm Representation Game Tree June 4, 2021 73347 Game TheoryLecture 12 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 4, 2021 73347 Game TheoryLecture 12 3 Today’s Agenda ? Examples ? Entry game ? Sequentialmove matching pennies ? Extensiveform representation ? Dynamic games of plete and perfect information ? Game tree June 4, 2021 73347 Game TheoryLecture 12 4 Entry game ? An incumbent monopolist faces the possibility of entry by a challenger. ? The challenger may choose to enter or stay out. ? If the challenger enters, the incumbent can choose either to acmodate or to fight. ? The payoffs are mon knowledge. Challenger In Out Incumbent A F 1, 2 2, 1 0, 0 The first number is the payoff of the challenger. The second number is the payoff of the incumbent. June 4, 2021 73347 Game TheoryLecture 12 5 Sequentialmove matching pennies ? Each of the two players has a penny. ? Player 1 first chooses whether to show the Head or the Tail. ? After observing player 1’s choice, player 2 chooses to show Head or Tail ? Both players know the following rules: ? If two pennies match (both heads or both tails) then player 2 wins player 1’s penny. ?