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1B Perfect Information
1B Perfect Information
1B Perfect Information
Perfect Information
In games of perfect information players take
turns making their moves, knowing what the
players who have moved before them have
chosen. Every perfect information game has
an extensive form in which all the
information sets are singletons. There are no
dotted lines joining nodes. Thus all the
strategic interactions are sequential.
Pepsi versus Coca Cola
After struggling through the Great Depression
of the 1930s Pepsi finds its soft drink sales are
stalled in the 1940s.
Coke shareholders
Management at Pepsi
Moreover as the
company with the
bigger white market
share, Coke has more
to lose in this case.
Day labor
In Los Angeles and other places employer
contractors routinely hire workers directly
off the street for a fixed wage for the day.
Contractors can offer different salary rates
to laborers, but they cannot directly control
the level of effort their laborers work.
Contractors would prefer to extract
strenuous effort from laborers for low
wages, but laborers prefer the opposite,
high wages and low effort.
Employment and effort
In this game a laborer is
willing to give up $8 a day
to provide moderate
rather than strenuous
effort, and a further $6 in
return for low effort.
The employer is willing to
pay $88 to extract
strenuous rather than
moderate effort, and loses
a further $66 if the worker
puts in low versus
moderate effort.
The choice labor faces
Reduced game for the employer
In 45-976 we
examine strategic
interactions within
the workplace in
greater depth.
Regional markets
Taking expected
values we are left
with a very simple
game tree.
Cheetah should
stay out, and Eagle
should enter.
The value of withholding
data on demand
Now suppose
Cheetah can prevent
Eagle from having
access to data on the
profitability of its new
route.
The game is
equivalent to the
picture on the
right.
Taking the
expectation over
the payoffs yields a
further
simplification.