Nash equilibrium dating and cournot equilibrium, welcome to clip from spiral
So I forget who it was, but someone down here who has disappeared, was our Jimmy Stewart character and helped coordinate you on a better equilibrium simply by suggesting what you should do.
All right, so last time we were talking about The Investor Game and this was a coordination game, and we learned some things.
So in this game if you just played it, it's quite likely you're going to end up uncoordinated, but if you have a little bit of leadership can say okay let's make sure this is where we coordinate, or let's make sure this is where we coordinate.
The reason it helps is you're trying to coordinate onto a Nash Equilibrium. One is this is very different from the Prisoner's Dilemma. In those kind of games, leadership can help tremendously. One way to think about Nash Equilibria is that they are self-enforcing agreements, so provided that everyone believes that everyone is going to go along with this agreement, then everyone in fact will.
So this matters a lot. One other remark before we leave this, in the game we played last time, in the investment game, one feature of that game was that the more you thought other people were going to invest, the more you wanted to invest.
You either want to coordinate on up left or you want to coordinate on down right.
Dating and Cournot [September 24, ] Chapter 1. And I don't want to overplay the social importance of this, but go back a couple of years to what was happening in the aftermath of Katrina and realize how important — how bad things get when things fail to be coordinated.
But one thing we can do is tell you where leadership may help. And clearly in this game what matters is coordinating.
If you go back to the time before that, we talked about this partnership game. And I don't think Game Theory is going to contribute to anything to understanding about leadership.
I want to make another, slightly more philosophical remark associated with this and it's to do with the idea of "leadership.