Thursday, February 10, 2011

Class #6: Take Aways

Turkey VultureA Hawk-Dove Game in Action

In class #6, we formally introduced the notion of Nash Equilibrium. A Nash equilibrium is a set of strategies that are mutual best responses. We also talked about archetypal games, games representing a wide array of real world business situations. These included: pure coordination games, battles of the sexes (coordination with a distributive element), hawk-dove (coordination with distributive and risky elements), stag hunt (simple model of trust), and prisoners dilemma. A key observation is that rationality is not sufficient to avoid bad outcomes. While individuals might be perfectly rational, strategic interaction can produce collective irrationality.

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