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Game Theory - Lecture 5

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Lecture 5 - Nash equilibrium: bad fashion and bank runs

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.

Prof. Ben Polak
ECON 159 Game Theory, Fall 2007
(Yale University: Open Yale)
Date accessed: 2009-01-15
License: Creative Commons BY-NC-SA

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Supplementary lecture material is listed below.

1. Problem Set 2



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