05 Nash equilibrium bad fashion and bank runs分析和总结分析和总结.docxVIP

Game Theory: Lecture 5 Transcript Overview: We first define formally the new concept from last time: Nash equilibrium. Then we discuss why we might be interested in Nash equilibrium and how we might find Nash equilibrium in various games. As an example, we play a class investment game to illustrate that there can be many equilibria in social settings, and that societies can fail to coordinate at all or may coordinate on a bad equilibrium. We argue that coordination problems are common in the real world. Finally, we discuss why in such coordination problems--unlike in prisoners dilemmas--simply communicating may be a remedy. September 19, 2007 back Professor Ben Polak: Okay, so last time we came across a new idea, although it wasnt very new for a lot of you, and that was the idea of Nash Equilibrium. What I want to do today is discuss Nash Equilibrium, see how we find that equilibrium into rather simple examples. And then in the second half of the day I want to look at an application where we actually have some fun and play a game. At least I hope its fun. But lets start by putting down a formal definition. We only used a rather informal one last week, so heres a formal one. A strategy profile--remember a profile is one strategy for each player, so its going to be S *, S *, all the way up to S* if there are M players playing the 1 2 M game--so this profile is a Nash Equilibrium (and Im just going to write NE in this class for Nash Equilibrium from now on) if, for each i–so for each player i, her choice--so her choice here is S *, i is part of i that profile is a best response to the other players choices. Of course, the other players choices here are S * so everyone is playing a best response to everyone else. --i Now, this is by far the most commonly used solution concept in Game Theory. So those of you who are interviewing for McKenzie or something, youre going to find that theyre going to expect you to know what this is. So one reason for knowing what it is, is