ECON 202 1nd Edition Lecture 29 Outline of Last Lecture I. Monopolistic Competitiona. Characteristics of Monopolistic Competitionb. Profit Maximization – In Monopolistic Competitioni. Short Runii. Long RunOutline of Current Lecture I. Game Theorya. Golden Ballsb. The Prisoner’s Dilemmai. Nash EquilibriumCurrent LectureGame Theory- Pay off MatrixGolden Balls GameIbrahimNickSplit StealSplit $6800, $6800 $0, $13000Steal $13000, $0 $0, $0In this situation both Nick and Ibrahim have a weakly dominant strategy. In other words, both players would be better off picking steal. If not able to communicate with each other, they would theoretically both pick steal, losing $13000.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Prisoner’s DilemmaBetty (Column Player)Al (Row Player)Rat Clam UpRat 3 years, 3 years 0 years, 6 yearsClam Up 6 years, 0 years 1 year, 1 yearIn this game, Al and Betty both have a dominant strategy to rat.- Dominant strategy – a strategy that is best no matter what the other player does- Dominant Strategy Equilibrium – both players are playing their dominant strategyNash Equilibrium – a “mutual best response”the result of a player paying their best strategy given what the other players are
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