Lecture(ZhenfaXie).ppt

Conclusion * Homework 3: Contributing to A Public Good * Hotelling’s Model of Electoral Competition Players：Two candidates Actions：Each candidate’s set of actions is the set of positions numbers Payoffs：Candidates aim to maximize share of vote. * Best Response * Figure: Best Response * Conclusion The conclusion is that the competition between the candidates to secure a majority of the votes drives them to select the same position，equal to the median of the citizens’ favorite positions. * Candidate – Voter Model Compare to Hotelling’s model Even distribution of voters Voters vote for the closest candidate New The number of candidates is not fixed – endogenous Candidates can not choose their position Each voter is a potential candidate * 0 1 Candidate – Voter Model Players: voters / candidates Strategy: To run or not to run Voters vote for closest running candidate Win if plurality flip if tie Payoffs: Prize if win B B 2C Cost of running C And if you are at x and winner is at y→-|x-y| * Candidate – Voter Model For example: The payoffs of Mr. x is If Mr. x enters and wins → B-C If Mr. x enters but Mr. y wins → -C-|x-y| If Mr. x stays out and Mr. y wins → -|x-y| * Candidate – Voter Model If B 2, C 1, |x-y|≤1 NE with 0 candidates? → No. NE with 1 candidates? → Yes, if odd number voters and centrist candidate NE with 2 candidates? → Yes, if equal distant from center. But if the 2 candidates are too extreme, someone in center will enter. * Candidate – Voter Model How far apart can two equilibrium candidates be Inside 1/6, 5/6 . * * Nash Equilibrium Definition: A strategy profile s1*,s2*,···,sN* is a NE if, for each i, her choice si* is a best response to the other players’ choices s-i*. Motivations No regrets: no individual can do strictly better by deviating, holding others fixed. Self-fulfilling beliefs Converge: there are certain circumstances in which play converges in the natural sense to an equilibrium. * Find Pure Nash Equilibrium 2 l c r 1 U 0,