We continue the idea (from last time) of playing a best response to what we believe others will do. More particularly, we develop the idea that you should not play a strategy that is not a best response for any belief about others' choices. We use this idea to analyze taking a penalty kick in soccer. Then we use it to analyze a profit-sharing partnership. Toward the end, we introduce a new notion: Nash Equilibrium.

00:00:00 Best Response: Penalty Kicks in Soccer
00:15:14 Best Response: Issues with the Penalty Kick Model
00:24:06 Best Response: Formal Definition
00:29:59 Externalities and Inefficient Outcomes: The Partnership Game
01:07:23 Nash Equilibrium: Preview

Source: Ben Polak, Game Theory (Yale University: Open Yale Courses). Licensed under CC BY-NC-SA 3.0.