1. Problems from Chapter 8

2. Galileo and the Papal Inquisition

3. Describe strategies in the subgame perfect equilibrium. What does pope do? What does Galileo do at each of his decision nodes? What does the inquisitor do?

4. Strategic Form Three Players.—What are the strategies?

5. Strategic form if Pope refers case Confess Before Torture. Confess if tortured Confess before torture. Do not confess if tortured Do not confess before torture. Confess if tortured Do not confess before torture. Do not confess if tortured Torture 5,4,3 4,5,11,1,2 Do not torture 5,4,3 2,2,4 Galileo’s Strategy Payoffs if Pope Refers the Case to the Inquisition Inquisitor’s Strategy Payoffs listed x,y,z means x for Pope, y for inquisitor, z for Galileo

6. Strategic form if Pope doesn’t refer case Confess Before Torture and Confess if tortured Confess before torture but do not confess if tortured Do not confess before torture, confess if tortured Do not confess before torture, do not confess if tortured Torture 3,3,5 Do not torture 3,3,5 Galileo’s Strategy Payoffs if Pope Does not refer the Case to the Inquisition Inquisitor’s Strategy Payoffs listed x,y,z means x for Pope, y for inquisitor, z for Galileo

7. Some Nash equilibria Pope refers, Galileo will confess before torture and will confess if tortured, Inquisitor will torture if Galileo doesn’t confess beforehand. Pope refers, Galileo confess before torture, would not confess if tortured, Inquisitor will torture. Pope doesn’t refer, Galileo will not confess before torture, wouldn’t would confess if tortured, Inquisitor would torture if G doesn’t confess.

8. More Nash equilibria Pope doesn’t refer the case. Galileo would not confess either before or after torture. Inquisitor would torture. Pope doesn’t refer the case. Galileo would not confess either before or after torture. Inquisitor would not torture.

9. Piquant facts for fans of the waterboard. Galileo would rather confess before being tortured than be tortured. But if he is tortured, he would rather not confess. Pope would like Galileo to confess without being tortured. Pope would also be happy if Galileo is tortured and confesses. But Pope would rather not refer the case if Galileo would be tortured and not confess. So Galileo is not brought before the Inquisition.

10. Goblins Gold Problem Seven goblins, A,B,E,G,K,R, and U, divide 100 gold pieces A proposes an allocation of the gold. If at least half vote yes, allocation is accepted If not, A is sent away. Then B proposes and the remaining Goblins vote. This process continues down the list until either a proposal is accepted or only U is left in which case U gets all the gold.

11. Working backwards If only two goblins are left, R and U, then it is R’s turn to propose. R can make anything pass by voting for it. So he will choose 100 for R and 0 for U. Suppose there are 3 goblins left, K, R, and U, then it is K’s turn to propose. K’s best strategy is to offer 1 to U, 0 to R and 99 to himself. Why?

12. What’s the pattern? What if there were 100 goblins? How about 200? How about 300? What does this problem have to do with subgame perfection?

13. Thomas Schelling’s idea for dealing with kidnappers

14. Taking Turns in the Dark: (Subgame perfection with incomplete information ) Econ 171

15. Subgame Perfection with Imperfect Information How can the notion of subgame perfection help us if there is incomplete information? Look back at kidnapper game

16. What is a subtree of a game? It is a non-terminal node, together with all of the nodes that could be reached from this node. Incidentally, a Proper Subtree is a subtree that is not the entire game.

17. What is a regular subtree of a game? It is a subtree starting from one of the nodes of the game such that this subtree contains an entire information set if it contains at least one node from that set. A subgame is defined to be a regular subtree together with the associated payoffs. A proper subgame of a game is a subgame that does not contain the entire game. (by analogy to a proper subset of a set)

18. Subgame perfection In a game with imperfect information, a strategy profile is a subgame perfect Nash equilibrium if for every proper subgame of the game, its substrategy profile is a Nash equilibrium. That is, the actions taken in the proper subgame are a Nash equilibrium for the game that consists of just that subgame.

19. What is a substrategy profile? A strategy profile for a game specifies what a player will do at every information set in the game and specifies the payoffs at the end of the game. A substrategy profile of the original strategy profile specifies what each player will do at every information set in the subgame.

20. Alice and Bob Play in the Dark Bob Go to AGo to B Go to A Alice Go to B Go to A Go to B 2323 0000 1111 3232 How many proper subgames does this game have? A)0 B)1 C)2 D)3 E)More than 3

21. Alice and Bob Play in the Dark Bob Go to AGo to B Go to A Alice Go to B Go to A Go to B 2323 0000 1111 3232 How many subgame perfect Nash equilibria does this game have? A)0 B)1 C)2 D)3 E)4

22. Alice, Bob, and the outside option Go to AGo to B Go to A Alice Go to B Go to A Go to B 2323 0000 1111 3232 2.5 1 Go shoot pool What are the subgame perfect equilibria in this game? Bob Go to Movies

23. Valuable Trade Secret?

24. What are the Nash equilibria? EnterDon’t Enter Invest25,-25700,0 Don’t Invest400,501,000,0

25. What if they know if you have invested? What is the subgame perfect equilibrium?

26. Entry deterrence

27. The Yule Ball Tale

28. The Yule Ball Story Page 283, in your text. How many proper subgames (subgames not equal to the whole game) does this game have? A)0 B)1 C)2 D)3 E)More than 3

29. Dating Dilemma Ron Hermione Victor Asks Y,Y,YY,Y,NY,N,YY,N,NN,Y,YN,Y,NN,N,YN,N,N Ask8,3,6 1,8*,8* 3,2,4 Don’t 7*,6*,5* 2,5,3 2,5*,3 Hermione Victor Doesn’t Ask Y,Y,YY,Y,NY,N,YY,N,NN,Y,YN,Y,NN,N,YN,N,N Ask 4,7*,7*6,1,24,7*,7*6,1,2*4,7*,7*6,1,2*4,7*,7* 6,1,2 Don’t5,4,1 Ron

30. Simplifying the Game If Hermione ever reaches either of the two nodes where Ron gets to ask her, she would say Yes. So a subgame perfect equilibrium must be a Nash equilbrium for the simpler game in which Hermione always says “yes” to Ron if she hasn’t accepted a date from Victor.

31. Yes to VictorNo to Victor Ask8,3,61,8*,8* Don’t Ask7*,6*,5*2,5,3 Victor Asks Hermione’s strategy Ron’s Strategy Yes to VictorNo to Victor Ask4,7*,7*4*,7*,7* Don’t Ask5,4,1* Hermione’s strategy Victor Doesn’t Ask Ron’s Strategy

32. One lesson: Subgame Perfection does not eliminate all of love’s quandries

34. When does a lawmaker want a moderate law? Pick numbers so that a gentle law is enforced but not obeyed, and a severe law is neither enforced nor obeyed, but a moderate law is enforced and obeyed. Make b=f=j>4 (Violate law and not convicted is better than obeying the law) Make c>g>k. (Judge doesn’t like to punish) Make a > 4 (Weak law not obeyed if enforced) Make i<e<4 (Moderate and strong laws obeyed if enforced) Make g>8>k. (judge will enforce moderate law but not strong law. Make d=h=l Try g=9, c=10, k=7,,d=f=g=6, a=5