Game Theory and Information. What a "Game" means in Game Theory. Rivalry is direct. In...

Game Theory

and Information

What a "Game" means in Game Theory.

Rivalry is direct. In "Zero-Sum" games you win just what the other guy loses. Economic market games are often non-zero sum. Noncooperative often. Oligopolistic.

Pa yoff M a trix R a nd D Pro g ra m s

Ba rkle y's Pro fit $4 m illion

Ba rkley's p rofit $3 m illion

Ba rkley's p rofit $3 m illion

Ba rkley's p rofit $2 m illion

Allied 's p rofit $3 m illio n

Allied 's p rofit $2 m illio n

Allied 's p rofit$4 m illio n

Allied ' s p rofit $3 m illio n

Stra te g y 1 Stra te g y 2

Ba rkle y

Stra te g y A

Stra te g y B

Allie d

Nash Equilibrium:

A set of strategies such that each player believes accurately that he is doing the best he can given the strategy of the other player.

Ba rkley's Profit $4 m illion

Ba rkley's p rofit $3 m illion

Ba rkley's p rofit $3 m illion

Ba rkley's p rofit $4 m illion

Allied 's p rofit $3 m illio n

Allied 's p rofit $2 m illio n

Allied 's p rofit$4 m illio n

Allied ' s p rofit $3 m illio n

Stra te g y 1 Stra te g y 2

Ba rkle y

Stra te g y A

Stra te g y B

Allie d

Pa yo ff M a trix: No Dom ina nt Stra teg y fo r Ba rkle y

Applications of Game Theory outside of economics:

Prisoner's Dilemma MAD our historical Cold War policy on nuclear attack missiles and our defensive system.

Does Cheating Pay?

Walmart Case: Preemptive strategies.

Signalling strategies:

1. Avertising lawyers. 2. Internet come ons and pop ups 3. Reputation, word of mouth, advertising and the net. 4. Optometrists, ads, and quality. 5. Mergers, buyouts and signalling. Case issue: How can Kmart signal economic rebound? 6. Poker and false signals.

Game Theory and Repetition:

1. Contrast a one shot game.

2. Repeated games make it possible to give signals.

3. Reconsider the Prisoner's Dilemma, no repetition is possible and no signals.

4. Consider foreign policy with repetition.

The Net and Signalling:

1. Cookies as signal information. 2. eBay auctions and bidding. 3. The website, functions and appeal. 4. The imported reputation (e.g. Encylopedia Brittannica).

Experience Goods, Search Goods and Signals.

For example, nails and Coke

which is the experience good?

Repetition and experience & search goods.