ECON 159 - Lecture 7 - Nash Equilibrium: Shopping, Standing and Voting on a Line

Lecture 7 - Nash Equilibrium: Shopping, Standing and Voting on a Line

Overview

We first consider the alternative "Bertrand" model of imperfect competition between two firms in which the firms set prices rather than setting quantities. Then we consider a richer model in which firms still set prices but in which the goods they produce are not identical. We model the firms as stores that are on either end of a long road or line. Customers live along this line. Then we return to models of strategic politics in which it is voters that are spread along a line. This time, however, we do not allow candidates to choose positions: they can only choose whether or not to enter the election. We play this "candidate-voter game" in the class, and we start to analyze both as a lesson about the notion of equilibrium and a lesson about politics.

Resources

Assignment

Strategies and Games: Theory And Practice. (Dutta): Chapters 6-7

Strategy: An Introduction to Game Theory. (Watson): Chapter 10

Thinking Strategically. (Dixit and Nalebuff): Chapter 9, Section 5

Problem Set 3

Course Media

Transcript

html

Audio

mp3

Low Bandwidth Video

mov [100MB]

High Bandwidth Video

mov [500MB]