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The document discusses game theory concepts including:
1) Transforming extensive form games into normal (strategic) form and analyzing stability diagrams.
2) A Naive Bayesian approach where players have a prior vector of beliefs and choose strategies based on incomplete priors about other players.
3) The difference between credible and incredible threats, where credible threats align with backward induction and incredible threats result in Nash equilibria not derived from backward induction.
4) The concepts of common knowledge of rationality (CKR) and consistent alignment of beliefs (CAB).
The document discusses game theory concepts including:
1) Transforming extensive form games into normal (strategic) form and analyzing stability diagrams.
2) A Naive Bayesian approach where players have a prior vector of beliefs and choose strategies based on incomplete priors about other players.
3) The difference between credible and incredible threats, where credible threats align with backward induction and incredible threats result in Nash equilibria not derived from backward induction.
4) The concepts of common knowledge of rationality (CKR) and consistent alignment of beliefs (CAB).
The document discusses game theory concepts including:
1) Transforming extensive form games into normal (strategic) form and analyzing stability diagrams.
2) A Naive Bayesian approach where players have a prior vector of beliefs and choose strategies based on incomplete priors about other players.
3) The difference between credible and incredible threats, where credible threats align with backward induction and incredible threats result in Nash equilibria not derived from backward induction.
4) The concepts of common knowledge of rationality (CKR) and consistent alignment of beliefs (CAB).
Transformation of Extensive form game to strategic(or Normal form) game
Stability diagram of the game Nave Bayesian Approach Given the complete prior vector,p entertained by the Players Expectations of each player,i about theother players strategies will be expressed by the i-incomplete prior vectorp-iderived from p.(ie,without including p vector) ie, he will choose a strategyqiothat is his Best reply to
Credible & Incredible Threats
A threat is noncredible (incredible) if it is not in the player's interest to carry out this threat when he has an opportunity to do so. In a game of perfect information, a credible threat can be derived from backward induction. An incredible threat results in a Nash equilibrium that cannot be derived by backward induction.
Common knowledge of rationality (CKR) and consistent