Lesson 1
Externalities and Inefficient Outcomes Part 1
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We continue the idea (from last time) of playing a best response to what we believe others will do. More particularly, we develop the idea that you should not play a strategy that is not a best response for any belief about others' choices. We use this idea to analyze taking a penalty kick in soccer. Then we use it to analyze a profit-sharing partnership. Toward the end, we introduce a new notion: Nash Equilibrium. Polak, Ben. ECON 159, Game Theory, Fall 2007. Yale OpenCourseWare: Economics, Accessed 30/9/14 http://oyc.yale.edu/economics/econ-159/lecture-4 License: Creative Commons BY-NC-SA


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