The Nash Equilibrium Revisited ■ Nash Equilibriun I'm doing the best I can given what you are doing o You're doing the best you can given what am doing Chapter 13 Slide 21
Chapter 13 Slide 21 The Nash Equilibrium Revisited ◼ Nash Equilibrium ⚫ “I’m doing the best I can given what you are doing” ⚫ “You’re doing the best you can given what I am doing
The Nash Equilibrium Revisited Product choice Problem a Examples With A Nash Equilibrium ● Iwo cereal companies o Market for one producer of crispy cerea e Market for one producer of sweet cereal o Each firm only has the resources to introduce one cereal ● Noncooperative Chapter 13 Slide 22
Chapter 13 Slide 22 ◼ Examples With A Nash Equilibrium ⚫ Two cereal companies ⚫ Market for one producer of crispy cereal ⚫ Market for one producer of sweet cereal ⚫ Each firm only has the resources to introduce one cereal ⚫ Noncooperative The Nash Equilibrium Revisited Product Choice Problem
Product choice Problem Firm 2 Crispy Sweet Crispy 5,-5 10.10 Firm 1 Sweet 10,10 5,-5 Chapter 13 Slide 23
Chapter 13 Slide 23 Product Choice Problem Firm 1 Crispy Sweet Crispy Sweet Firm 2 -5, -5 10, 10 10, 10 -5, -5
Product choice Problem Question Firm 2 ● Is there a nash Crispy Sweet equilibrium? o If not, why? Crispy -5,-5 10.10 ●fso. how can it be reached Firm 1 Sweet 10,10 5,“5 Chapter 13 Slide 24
Chapter 13 Slide 24 Product Choice Problem Firm 1 Crispy Sweet Crispy Sweet Firm 2 -5, -5 10, 10 10, 10 -5, -5 ◼ Question ⚫ Is there a Nash equilibrium? ⚫ If not, why? ⚫ If so, how can it be reached
Beach Location Game ■ Scenario Two competitors, y and C, selling soft drinks Beach 200 yards long o Sunbathers are spread evenly along the beach ● Price y= Price c ● Customer wi‖ buy from the closest vendor Chapter 13 Slide 25
Chapter 13 Slide 25 Beach Location Game ◼ Scenario ⚫ Two competitors, Y and C, selling soft drinks ⚫ Beach 200 yards long ⚫ Sunbathers are spread evenly along the beach ⚫ Price Y = Price C ⚫ Customer will buy from the closest vendor