Micro Economics L3 - L7

Lecture 3 - 7

What is Game theory

Seeks to better explain how individuals interact with each other

What is the equation for working out Expected value

What is the equation for Utility, what is the utility function used for

What does risk neutrality mean between expect value and what graph/curve equation do we expect

What does risk adverse mean and what graph/curve equation do we expect

Risk aversion refers to the preference for a certain outcome over a gamble with a higher or equal expected value. In graphical terms, the utility curve is concave, indicating diminishing marginal utility with increasing wealth.

What does risk loving individual mean and what graph/curve equation do we expect

What are the components of a decision tree (5)

Example of risk neutral

What is normal Form Games

What are the assumptions of a normal form game (3)

How can normal form Matrix form

What is a iterated deletion of strictly dominated strategies

Example of a Iteration deletion of dominated strategies

What is a Nash equilibrium

How to find the Nash equilibria

Explain some of the following games, coordination game, Battle of seas, Pareto Coordination game and Chicken

What is a normal form game, a strategy, complete information, common knowledge and rationality

What is a continuous strategy game and examples of the game

What is Cournot competition and what are the equation he uses to show two firms and the two assumptions 

Example of how cournot competition

• Homogenous good

• No costs

List the three steps to find a Nash Equilibrium

What are steps 1 and 2 to solve the best response curves

What is the third step for solvong the best response equations

How to find the position where the best response curve interact

Go through example

What is the medium Voter theorem, how are voters distributed, hwo do voters maximise utility. What are the payoffs for the party’s

Explain the intutition behind the median voter theorem

What is an extensive form game/ what assumptions do we make, how are they displayed

What are the components of a decision tree$

What is a strategy

With this decision tree what are the possible outcomes, not optimal but possible strategies

What is backwards induction

Go through the trespass game

What is a Subgame and SPNE

Go through this example and work out the equilibrium

Go through this example

What are the criticisms of SPNE, and what game shows this

What are some additional criticisms of SPNE

Define Nash equilibrium

What is a repeated game/stage game

What does a SPNE demand in a repeated game

How is this first game impacted by being played twice

What logic is applied to Finite repetitions

What is the grim trigger strategy

Notes on what discounting is

How will player 1 continue cooperating

Go through example

Go through this example aswell on discounting

How does indefinite repetitions impact the game

Go through a continuous strategy

Show steps 1-2 on the continuous strategy

Show steps 3-4 on the continuous strategy