14.12 Economic Applications of
Game Theory
• Professor: Muhamet Yildiz
1
Swansea
Merthyr
Banbury Luton
Oxford
Tydfil
Swindon
London
Prime Meridian
WALES
Chelmsford
Gillingham
Cardiff
Bristol
Newbury
Barnstaple
Maidstone
UNITED KINGDOM
Tiverton
Hastings 2o
Celtic Sea
Exeter
Havant
Brighton
Bodmin
Bournemouth
Berck-sur-Mer
Torquay
Truro
Plymouth
Eu 50o
Falmouth
English Channel
Dieppe
Fecamp
Cherbourg
Yuetot
90 m
Le Havre
Carentan
Rouen
104 m
Caen
Lisieux
St.-Lo
136 m
49o
FRANCE
Coutances
Evreux
Perros-Guirec
BASSE-NORMANDIE
La Ferte-Mace o
3o
2o
1o
1
Image by MIT OpenCourseWare.
3
Name of the game
Game Theory = Multi-person decision theory
• The outcome is determined by the actions
independently taken by multiple decision
makers.
• Strategic interaction.
- Need to understand what the others will do
... what the others think that you will do
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A coordination game
Left
Right
Top
(1,1)
(0,0)
Bottom
(0,0)
(1,1 )
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A game
2
L
m
R
T
(1,1)
(0,2)
(2,1)
M
(2,2)
(1,1)
(0,0)
B
(1 ,0)
(0,0)
(-1,1)
1
6
A coordination game
Left
Right
Top
(1,1)
(0,0)
Bottom
(0,0)
(1,1 )
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Battle of Sexes
Baseball
Opera
Baseball
(2,1 )
(0,0)
Opera
(0,0)
(1,2)
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Battle of The Sexes with perfect information
1
o
B
2, 1
0,0
0,0
1,2
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Battle of Sexes with outside option
1
Exit
(3/2,3/2)
B
0
B
(2,1)
(0,0)
o
(0,0)
(1,2)
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Hawk-Dove game
⎛V − c V − c ⎞
,
⎟
⎜
2 ⎠
⎝ 2
(0,V)
(V,0)
V>c
(V/2,V/2)
Image by MIT OpenCourseWare.
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Hawk-Dove game
Hawk-Dove game
(y,y]
(V,O)
⎛V − c V − c ⎞
,
(V,0)
⎟
⎜
⎝ 2
~
2 ⎠
V<c
V<c
(OJ')
(V/2
)
(0,V)
(V/2,V/2)
Image by MIT OpenCourseWare.
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Chicken
Chicken
~
'
~~ .::.:.~.
:-.. . y;'''
.. -'=..,
(-1,-1)
(-1,-1)
(1,0)
(1,0)
(0,1)
(0,1)
(1 /2,1/2)
(1/2,1/2)
Image by MIT OpenCourseWare.
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Stag Hunt
Stag Hunt
~
¥
(2,2)
(3 ,3)
(4,0)
(3 ,0)
(0,4)
(0,3)
(5,5)
(5 ,5)
Image by MIT OpenCourseWare.
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14.12 Economic Applications of Game Theory
Fall 2012
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