Following on from week 2’s short clip on PDIP and the 6 questions we introduce a simple sequential 2 player 2 move game – first in an abstract form using “cards” in class with both money and chocolate bar payoffs, then by telling a story about an attempt to deter entry of a competitor by investment in large capacity . Both stories have similar strategic structure…revealled in their game trees. Ina separate, subsequent clip for week 2 we introduce the idea of rolback reasoning – backward induction – to analyze this game. Note that the reasoning processes given by students in the classroom game is/was a great example of intelligent intuition based on rollback reasoning. The next clip for this week on rollback reasoning uses this intuition in a more structured way using the 2×2  game tree. It’s a fairly straightforward way of reasoning…but absent from so many political and institutional managers/players in all walks of life . Hopefully not you!!

This clip is an edited version of the last half an hour of lecture 3 in econ 223 Thurs Feb 21 2013