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Lecture Notes for ECON 703 - ADVANCED MICRO I with Cramton at Maryland (UMD)

Notes Information

Material Type:Class Note
Professor:Cramton
Class:ECON 703 - ADVANCED MICRO I
Subject:Economics
University:University of Maryland
Term:--
Keywords:
  • Extensive Form
  • Unfortunately
  • Information
  • Important Result
  • Stable Equilibrium
  • Rationality
  • Formalization
  • Traditional
  • Probabilities
  • Definitions
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Economics 703 Advanced Microeconomics Prof. Peter Cramton Lecture Note 4: Refinement1 Outline A. Subgame Perfection Revisited B. Sequential Equilibrium 1. Sequential Rationality 2. Consistency 3. Structural Consistency C. Trembling-Hand Perfection D. Strategic Stability 1. Backward Induction and Invariance 2. Admissibility and Iterated Dominance 3. Stable Equilibrium A. Subgame Perfection Revisited The refinements of the Nash equilibrium concept surveyed in this section are all attempts to extend the spirit of Selten's [1965] definition of subgame perfection to games with imperfect information. To begin, we review the effect of subgame perfection in games of perfect information and the problems that arise with imperfect information. Game 1: Normal Form l R -1,-1 r L 1, 1 2, 0 1, 1 2 1 1 1 l r L R 1 2 1: 2 -1 2: 0 -1 Extensive Form The normal form reveals that both (L...

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