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.

📑 Lecture Chapters:

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

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