5-3-2012Lecture Notes 5:2This material will not be on the midterm.I. Simultaneous GamesA. Prisoners' DilemmaB. Normal FormC. Dominant StrategiesII. Prisoners' Dilemmas and Invisible HandsI. Up until now, we've been doing sequential games. But now, we will be looking at simultaneous games, which are slightly trickier because there is not as much precision.In simultaneous games, we use Normal Form instead of a tree like we did in sequential games.Column Player Betray Not-2-2-500-5-1-10: made a deal with the police-1: each prisoner convicted of minor offense-2: both helped the police so the police has evidence against both-5: police has evidence to convict Column Player Betray Not-2DominantStrategy-2-500-5-1-1BetrayRow PlayerNotBetrayRow PlayerNotDominant Strategies- one way to solve a simultaneous game- most unproblematic / uncontroversial way- Strategy A is dominated by Strategy B if payoffs are higher from B than from A no matterwhat the other player does- predict that both players will play their dominant strategy- better off to betray; self-interest but worse for group2 Questions to think about:1) What makes a game a PD?2) Why would these guys be so bad?Column Player Defect CooperatePcPrScTrTcSrRcRrR: RewardP: PunishmentS: SuckerT: TemptationIn order to be PD: T > R > P > S for i=r, cDefect: dominant strategy requires: P> S and T > Routcome is worse for both: R > P(when both play dominant strategies)Column Player Betray Not-2ParetoIneffecient-2-500-5-1-1II.DefectRow PlayerCooperateBetrayRow PlayerNotInvisible Hands: individual incentives lead to group goodPrisoners' Dilemma: individual incentives work against groupThe troubling thing about Prisoners' Dilemma is that both want R but there is no incentive to cooperate. Therefore, they end up in P.Social norms and socialization guides us to overcome PD in our daily lives. These are the long term responses to PD and the payoffs may not fit the PD. Examples include guilt, shame, loyalty, morals,