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. **Reading assignment:** Strategies and Games: Theory And Practice. (Dutta): Chapter 5 Strategy: An Introduction to Game Theory. (Watson): Chapters 6-9 Thinking Strategically. (Dixit and Nalebuff): Chapter 3, Sections 4-6 **Resources:** ;[[http://oyc.yale.edu/sites/default/files/blackboard04 0.pdf|Blackboard Notes Lecture 4[PDF]]]