EC4004Lecture 7Game Theory Part TwoDr Stephen Kinsella

Any game described by

Players

Strategies

Payoffs

Nash Equilibrium

And Now:

Story

2 Lads.Caught.

Separated.

Offered a deal:

“If you confess and your companion doesn’t, I can promise you a six-month

sentence, whereas your companion will get ten years. If you both confess,

you will each get a three year sentence.”

Demo Time.

Emma Breen, 0730556

James Foley, 0739758

Results

086 399 83 06

Normal. Form.

Extensive. Form.

.. .Confess

Confess Confess

Silent

Silent Silent

-3, -3 -10, -1 -1, -10 -2, -2

A

B B

Step 1

Step 2

Step 3

Step 4

Step 5

(-3, -3) is the Nash Equilibrium.

But.

Not the global optimum

Stability.

End.

Try 6.7, 6.8, 6.9

EC4004Lecture 7Game Theory Part TwoDr Stephen Kinsella