Microeconomics II-1:

Objective: building a strategic model.
• Introduction of main notions.
• Examples and applications.
• We won’t solve the games yet !

• Who are the players (decision makers)? 
• What moves are available to each player and when ? => Strategies.
• What does each player know at the time of each of his decisions ? => Information.
• What are the outcomes and payoffs at the end?

1. Extensive form representation 
2. Strategies
3. Strategic form representation

• a set of players 
• a tree 
• an informational partition (to be made precise) 
• a payoff for each player at each terminal node.

• Two agents, Andy and Barb.
• Two identical items.
• Andy choose first: (i) he keeps both items, (ii) they share or (iii) he gives both items to Barb. 
• Then Barb gets to either reject the allocation or accept the allocation.

• A decision tree is read from top to bottom. 
• Each of the dots is called a decision node, which represents a point at which someone has a decision to make.
• Some branches come out of a decision node. A branch represents a different action available to the decision maker.

the “ultimatum game”