ECON 159 - Lecture 14 - Backward Induction: Commitment, Spies, and First-Mover Advantages

Lecture 14 - Backward Induction: Commitment, Spies, and First-Mover Advantages

Overview

We first apply our big idea--backward induction--to analyze quantity competition between firms when play is sequential, the Stackelberg model. We do this twice: first using intuition and then using calculus. We learn that this game has a first-mover advantage, and that it comes commitment and from information in the game rather than the timing per se. We notice that in some games having more information can hurt you if other players know you will have that information and hence alter their behavior. Finally, we show that, contrary to myth, many games do not have first-mover advantages.

Resources

Assignment

Strategies and Games: Theory And Practice. (Dutta): Chapter 11

Strategy: An Introduction to Game Theory. (Watson): Chapter 2

Problem Set 6

Course Media

Transcript

html

Audio

mp3

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mov [100MB]

High Bandwidth Video

mov [500MB]