Chapter 9_4th ed.pdf

1 Chapter 9 Strategic Moves Changing the rules of the game can change outcomes. It is natural to expect that, if possible, the players will try to manipulate the rules of the game in their favor. Next, we allow the players to change the rule by using strategic moves such as commitments, threats and promises. Like in direct communication games (Ch. 9), strategic moves create a two-stage game. In the first stage or pre-game, a player makes a strategic move. But unlike in direct communication games, in the second stage the original game can now be altered – payoffs can change or available moves can change or the order of moves can change. Strategic moves are classified into three types – commitments, threats and promises. Commitments, threats or promises will work if they are credible, i.e. if the other player believes that the commitment, threat or promise made in the first stage will be carried on. There is no exact science teaching how to make a strategic move credible. In real life, the use of strategic moves involves components of art. Unconditional Strategic Moves If, in stage 1, a player makes a move (takes an action) that unconditionally commits him to some move (action) in the 2nd stage game, the 1st stage move is called commitment. Commitments are unconditional strategic moves (in the 1st stage). If the player’s commitment is credible, it practically makes her the first mover. If the original game was such that she was the 1st mover anyway, then there is no sense for her in making a commitment. But if the original game was simultaneous move or she was the second mover, and if in either case there was a first mover advantage, a credible commitment will improve her payoff. Hence, a commitment is simply seizing the first mover advantage when it exists. For example, in the sequential street-garden game of Ch.3 with Emily, Nina and Talia, in the rollback equilibrium Emily was not contributing, while Nina and Talia w