1 / 6

19 - Subgame perfect equilibrium: matchmaking and strategic investments

19 - Subgame perfect equilibrium: matchmaking and strategic investments. 2 players. Not a hard game. Can do with backwards induction. . Player 1 may choose D if he doesn’t trust the other person. Lesson 20: Wars of Attrition.

senwe
Download Presentation

19 - Subgame perfect equilibrium: matchmaking and strategic investments

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. 19 - Subgame perfect equilibrium: matchmaking and strategic investments

  2. 2 players.Not a hard game. Can do with backwards induction. Player 1 may choose D if he doesn’t trust the other person.

  3. Lesson 20: Wars of Attrition

  4. Bribe contests (try to get your way by bribing, but as long as both parties do, no winner) – also called all pay auctions. Bidding for a $1 bill Possible that a fight could go on quite a while. By the time they fought the second time, they had exhausted the reward. Over time, losses far exceed possible prize at stake. Reasons for the fight: a. Want to establish a reputation of being fighters. Reputation could extend beyond this game. b. Even though the prize is only a dollar, the players care about winning! (pride) A dollar isn’t a good description of reward. c. Losses in the past are “sunk” – lost it anyway. Are irrelevant now. If fighting seemed good initially, would still seem good later. Can get huge loss even if: a. no reputation to maintain b. are rational

  5. Look at a simplified version – only two periods.

More Related