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01.25.01Lecture Notes in Game Theory1 Game Theory Applications: Lecture Notes Course Website http://www.citi.umich.edu/u/galka/games u Galina Albert Schwartz Galina Albert Schwartz u Department of Finance u University of Michigan University of Michigan u Business School Business School
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01.25.01Lecture Notes in Game Theory2 Summary of Lectures 4 & 5 (the beginning) u Sequential & Similtaneous Move Games: Dixit, chapters 3 & 4 u Extensive form games u Backward Induction [rollback methodology] u Pure & mixed strategies u Experiments in Strategy u Second mover advantage, Dixit, p. 57 [brothers or pirates?]
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01.25.01Lecture Notes in Game Theory3 Extensive Form Games u Gambit on the web Gambit on the web http://www.hss.caltech.edu/gambit/Gambit.html u Full information games [complete] u Game Tree = Extensive form game –initial node –decision node –terminal node
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01.25.01Lecture Notes in Game Theory4 Backward Induction u We assume –Complete information –Pure strategy u Strictly dominated strategies u Weakly dominated strategies u Best Response Action
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01.25.01Lecture Notes in Game Theory5 The Centipede Game –backward induction –rational or irrational? –What happens if the game is repeated?
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01.25.01Lecture Notes in Game Theory6 What is fair? u Examples –centipede game –divide a dollar game »`normal’ version & » dictator version u The notion of Social (cultural) norm
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01.25.01Lecture Notes in Game Theory7 Lewis, Ch 4: their games u Communications –norm –deviance u Gentle & Tough
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01.25.01Lecture Notes in Game Theory8 More Examples u Free Tea & Coffee for faculty – in Princeton –in UMBS u Why? u Greenspan –precise –wordy –then, why do we care at all?
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01.25.01Lecture Notes in Game Theory9 To Do: your preparation u To read: –Dixit, chapters 3 & 4 –Lewis, chapter 5 u Next time: More small examples of different types of games u Next time the absolutely necessary component? of the Greenspan’s strategy [and any other Central Banker’s strategy]
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