Economics 650 Game Theory

1
Economics 650 -- Game Theory
2
Gambling the Night Away 1
Basic proper subgames?
3
Gambling the Night Away 2
Yes, the strategy will work -- as we see with the
reduced game, it is subgame perfect.
4
A Drug on the Market 1
5
A Drug on the Market 2

• The decision at K is basic. When X is 4, the
  solution in the basic subgame is that Klever
  chooses succeed and in the subgame perfect
  equilibrium Wellspring chooses realease for a
  payoff of 12 rather than 5. The subgame perfect
  equilibrium thus is release, succeed. When X is
  8, however, Klever chooses fail in the basic
  subgame and accordingly, in the subgame perfect
  equilibrium, Wellspring chooses dont for a
  payoff of 5 rather than 2. The subgame perfect
  equilibrium then is dont release and Klever
  has no decision to make.

6
Dean Game 1
Basic Proper Subgames
7
Dean Game 2
8
Dean Game 3
The subgame perfect sequence is float, sign,
college.
9
Accreditation
Without going into numerical detail In the
absence of accreditation rules, in the
negotiation game with higher administration, the
dean might be required to make adjustments that
make the colleges market position poorer, by
using fewer resources (though other colleges
might use the resources to the overall advantage
of the university.) By imbedding this game in a
larger game in which the college could be
penalized for such cuts, the dean may shift the
subgame perfect equilibrium in the negotiation
game to the advantage of his school.