Centipede Game
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Lecture 9
Reputation Formation
14.123 Microeconomic Theory III Muha met Yildiz
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Centipede Game – w ith doubt
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Facts about SE in Centipede
2 always goes across with positive probability.
Ever y information set of 2 is reached
If 2 strictly prefers to go across at n , then
she must strictly prefer t o go across at n +2,
her posterio r at n is her prior.
For an y n > 2, 1 goes across with positi v e probability. If 1 goes across w/p 1 at n , then 2’s posterior at n -1 is h e r prior.
If 2 is mixing at n , th en
(1- n ) p n -1 = 1/2
n = n -2 /2
n n -2 /2
Centipede Game – w ith doubt
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M IT OpenCourseWare http://ocw.mit.edu
1 4.123 Microeconomic Theory III
Spring 2010
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