Microeconomics: Theory and Applications with Calculus, 4e

13.2 Dynamic Games

In static, normal-form games, players have imperfect information about how other players will act because everyone moves simultaneously and only once. In contrast, in dynamic games, players move sequentially or move simultaneously repeatedly over time, so a player has perfect information about other players’ previous moves.

We consider two types of dynamic games. We start with a repeated or multiperiod game in which a single-period, simultaneous-move game, such as the airline prisoners’ dilemma game, is repeated at least twice and possibly many times. Although the players move simultaneously in each period, they know about their rivals’ moves in previous periods, so a rival’s previous move may affect a player’s current action. ...