1Markets, Games, and Strategic Behavior: Recipes for Interactive Learning Charles A. Holt University...

Question

1Markets, Games, and Strategic Behavior: Recipes for Interactive Learning Charles A. Holt University of VirginiaComments welcome: XXXXXXXXXX 2005 This draft includes new chapters on Extensive-Form Games, Monopoly/Cournot, Market Institutions and Power, Collusion, Lemons Markets, Asset Markets and Bubbles, Multi-Unit Auctions, Trust and Reciprocity, and Common Pool Resources. The book is organized so that one can cover the first 5 chapters and then skip around to particular topics of special interest. Each chapter is designed to be a reading assignment for a single class, and each chapter is matched with one or more suggested experiments, either run on the Veconlab website or by hand, with instructions provided in the appendices.
Markets, Games, and Strategic Behavior ñ Charles A. Holt 2Charles A. Holt University of Virginia© Copyright, All Rights ReservedAll rights reserved.

005_jk-wr1pbhrj.pdf

David · Accepted Answer

There are many situations in which a person does not want to be predictable. The equilibrium in 
such situation involves randomization, but for randomization, we need each player to be 
indifferent between the decisions over which they are to be randomized. In particular, each 
player‟s decision probabilities have to keep the other player indifferent. Moreover, 
randomization is important because it allows the game to have a different kind of Nash 
equilibrium (known as, mixed strategy Nash equilibrium) even though the game has no pure 
strategy Nash equilibrium. The classical example of this is “Matching Pennies” game. In this 
game, each person tosses a coin, covering it so that the other player cannot see the outcome. 
There is an agreement between the players that player 1 (row player) will win the game if the 
pennies match and the other player (column player) will win the game if they do not match. The 
following game can be represented by the following (2*2) matrix;

1Markets, Games, and Strategic Behavior: Recipes for Interactive Learning Charles A. Holt University of VirginiaComments welcome: XXXXXXXXXX 2005 This draft includes new chapters on Extensive-Form...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment