Nash equilibrium
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This lecture explains what an economic model is, and why it allows for counterfactual reasoning and often yields paradoxical conclusions. Typically, equilibrium is defined as the solution to a system of simultaneous equations. The most important economic model is that of supply and demand in one market, which was understood to some extent by the ancient Greeks and even by Shakespeare. That model accurately fits the experiment from the last...more
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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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This course deals primarily with equilibrium properties of macroscopic systems, basic thermodynamics, chemical equilibrium of reactions in gas and solution phase, and rates of chemical reactions.
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We first play and then analyze wars of attrition; the games that afflict trench warfare, strikes, and businesses in some competitive settings. We find long and damaging fights can occur in class in these games even when the prizes are small in relation to the accumulated costs. These could be caused by irrationality or by players' having other goals like pride or reputation. But we argue that long, costly fights should be expected in these...more
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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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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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Until now we have ignored risk aversion. The Bernoulli brothers were the first to suggest a tractable way of representing risk aversion. They pointed out that an explanation of the St. Petersburg paradox might be that people care about expected utility instead of expected income, where utility is some concave function, such as the logarithm. One of the most famous and important models in financial economics is the Capital Asset Pricing Mod...more
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Review. Professor Sylvia Ceyer reviews the main topics covered throughout the second half of the course including kinetics, transition metals, VSEPR theory, acid-base equilibrium, chemical equilibrium, and oxidation/reduction. Professor Ceyer uses the case study of methionine synthase to supplement the discussion.
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In business or personal relationships, promises and threats of good and bad behavior tomorrow may provide good incentives for good behavior today, but, to work, these promises and threats must be credible. In particular, they must come from equilibrium behavior tomorrow, and hence form part of a subgame perfect equilibrium today. We find that the grim strategy forms such an equilibrium provided that we are patient and the game has a high p...more
