Nash equilibrium
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We discuss evolution and game theory, and introduce the concept of evolutionary stability. We ask what kinds of strategies are evolutionarily stable, and how this idea from biology relates to concepts from economics like domination and Nash equilibrium.
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This lecture is a continuation of an analogue to Newton's law: τ= lα. While previous problems examined situations in which τ is not zero, this time the focus is on extreme cases in which there is no torque at all. If there is no torque, α is zero and the angular velocity is constant. The lecture starts with a simple example of a seesaw and moves on to discuss a collection of objects that are somehow subject to a variety of forces but r...more
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We continue our discussion of mixed strategies. First we discuss the payoff to a mixed strategy, pointing out that it must be a weighed average of the payoffs to the pure strategies used in the mix. We note a consequence of this: if a mixed strategy is a best response, then all the pure strategies in the mix must themselves be best responses and hence indifferent. We use this idea to find mixed-strategy Nash equilibria in a game within a g...more
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Static equilibrium is covered in this lecture, achieved only when the net external force AND net external torque on an object are both zero. A ladder leaning against the wall is analyzed to determine the minimum angle it can make with the floor without sliding. Professor Lewin continues with the topic by discussing how to locate the center of mass of a rigid body. The center of mass always lines up below the point of suspenson such that t...more
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In this lecture, Professor Lewin displays how the conservation of mechanical energy can be used to derive the equation of motion for simple harmonic oscillators (SHO). In doing so he covers gravitational potential energy, equilibrium points where the net force is zero, parabolic potential energy, and circular potential energy.
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We first consider the alternative "Bertrand" model of imperfect competition between two firms in which the firms set prices rather than setting quantities. Then we consider a richer model in which firms still set prices but in which the goods they produce are not identical. We model the firms as stores that are on either end of a long road or line. Customers live along this line. Then we return to models of strategic politics in which it i...more
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We continue the idea (from last time) of playing a best response to what we believe others will do. More particularly, we develop the idea that you should not play a strategy that is not a best response for any belief about others' choices. We use this idea to analyze taking a penalty kick in soccer. Then we use it to analyze a profit-sharing partnership. Toward the end, we introduce a new notion: Nash Equilibrium.
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We analyze three games using our new solution concept, subgame perfect equilibrium (SPE). The first game involves players' trusting that others will not make mistakes. It has three Nash equilibria but only one is consistent with backward induction. We show the other two Nash equilibria are not subgame perfect: each fails to induce Nash in a subgame. The second game involves a matchmaker sending a couple on a date. There are three Nash equi...more
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We first complete our discussion of the candidate-voter model showing, in particular, that, in equilibrium, two candidates cannot be too far apart. Then we play and analyze Schelling's location game. We discuss how segregation can occur in society even if no one desires it. We also learn that seemingly irrelevant details of a model can matter. We consider randomizations first by a central authority (such as in a bussing policy), and then d...more
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We apply the notion of Nash Equilibrium, first, to some more coordination games; in particular, the Battle of the Sexes. Then we analyze the classic Cournot model of imperfect competition between firms. We consider the difficulties in colluding in such settings, and we discuss the welfare consequences of the Cournot equilibrium as compared to monopoly and perfect competition.
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Continuing the discussion of Lewis structures and chemical forces from the previous lecture, Professor McBride introduces the double-well potential of the ozone molecule and its structural equilibrium. The inability for inverse-square force laws to account for stable arrangements of charged particles is prescribed by Earnshaw's Theorem, which may be visualized by means of lines of force. J.J. Thomson circumvented Earnshaw's prohibition on ...more
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This course is an introduction to game theory and strategic thinking. Ideas such as dominance, backward induction, Nash equilibrium, evolutionary stability, commitment, credibility, asymmetric information, adverse selection, and signaling are discussed and applied to games played in class and to examples drawn from economics, politics, the movies, and elsewhere.
