Lecture 7 - Nash equilibrium: shopping, standing and voting on a line

author: Benjamin Polak, Department of Economics, Yale University
recorded by: Yale University
published: Nov. 15, 2010,   recorded: September 2007,   views: 3443
released under terms of: Creative Commons Attribution No Derivatives (CC-BY-ND)
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Description

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.

Reading 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

Resources:

Problem Set 3 [PDF]
Discussion of Linear-City Homework [PDF]
Blackboard Notes Lecture 7[PDF]

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