Payoff Matrix for Advertising Game Observations ● Dominant Firm B Don't Advertise advertise strategy for A B is to advertise Advertise 10.5 15,0 Do not worry about the other Firm A Don't player Advertise 6,8 10.2 ● Equilibrium in dominant strategy Chapter 13 Slide 16
Chapter 13 Slide 16 Payoff Matrix for Advertising Game Firm A Advertise Don’t Advertise Advertise Don’t Advertise Firm B 10, 5 15, 0 6, 8 10, 2 ◼ Observations ⚫ Dominant strategy for A & B is to advertise ⚫ Do not worry about the other player ⚫ Equilibrium in dominant strategy
Dominant Strategies a Game Without Dominant Strategy o The optimal decision of a player without a dominant strategy will depend on what the other player does Chapter 13 Slide 17
Chapter 13 Slide 17 Dominant Strategies ◼ Game Without Dominant Strategy ⚫ The optimal decision of a player without a dominant strategy will depend on what the other player does
Modified Advertising Game Firm B Don't Advertise Advertise Advertise 10.5 15,0 Firm A Don't Advertise 6,8 20.2 Chapter 13 Slide 18
Chapter 13 Slide 18 10, 5 15, 0 6, 8 20, 2 Firm A Advertise Don’t Advertise Advertise Don’t Advertise Firm B Modified Advertising Game
Modified Advertising Game ■ Observations Firm B Don't ●A: No dominant Advertise Advertise strategy depends on B's Advertise 10,5 15,0 actions ●B: Advertise Firm A Don't ■ Question Advertise 20.2 ● What should a do?(Hint consider b's decision Chapter 13 Slide 19
Chapter 13 Slide 19 10, 5 15, 0 6, 8 20, 2 Firm A Advertise Don’t Advertise Advertise Don’t Advertise Firm B Modified Advertising Game ◼ Observations ⚫ A: No dominant strategy; depends on B’s actions ⚫ B: Advertise ◼ Question ⚫ What should A do? (Hint: consider B’s decision
The Nash Equilibrium Revisited a Dominant Strategies I'm doing the best I can no matter what you do . You're doing the best you can no matter what/ do Chapter 13 Slide 20
Chapter 13 Slide 20 The Nash Equilibrium Revisited ◼ Dominant Strategies ⚫ “I’m doing the best I can no matter what you do.” ⚫ “You’re doing the best you can no matter what I do