3 Real Men Don't Eat Quiche (neither do wimps. . .) A man walks into a diner, we'll call him Al, to order breakfast and in this particular diner there are only two possible meals; beer and quiche. There is another man already in the diner who likes to harass others, we'll call him Bert. After seeing Al order his breakfast, Bert decides whether or not to bully him. Since Bert has never seen Al before he doesn't know what kind of person he is. Al could be a tough guy or he could be a wimp and he assumes that nature selected him as being one type or the other before Al walks in the diner such that with probability r, Al is a wimp. If Al is tough he prefers beer for breakfast and gets a payoff of 3 if Bert doesn't annoy him. If Al is tough and he orders quiche, well, he eats it but only gets a payoff of 2 assuming Bert doesn't try to bully him. In either case, if Bert tries to bully him, Al's payoff goes down by 1 from the base level. If Al is a wimp, then he prefers quiche for breakfast and gets a payoff of 3 from it if he is not bullied and a payoff of 2 if he orders beer and isn't bullied. Since he is a bit of a wimp, if Bert tries to bully him, his payoff drops by 2 in either case. Bert gets a payoff of 1 from bullying a wimp, 0 from deferring to one. If Bert tries to Bully a tough guy, he gets beaten to a pulp and therefore gets a payoff of -1 whereas if he defers to a tough guy, he gets a payoff of 1. a. Derive the extensive form of this game. b. Find a pooling Bayesian Nash equilibrium of this game assuming that r = 3. (The title of the question should be taken as a hint) c. For what values of r can you not find a pooling BNE?

Which of the following gambles is “unfair”?   a. A game that promises to pay you $1 if a coin comes up head and cost you $1 if a coin comes up tail,  with no entry fee.   b. A game that promises to pay you $10 if a coin comes up head and cost you $1 if a coin comes up tail, with no entry fee.   c. A game that promises to pay you $10 if a coin comes up head and cost you $1 if a coin comes up tail, with an entry fee of $4.50 for the right to play.   d. All of the above.

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31 Joe Low Effort Sarah Low Effort High Effort 7 7 High Effort 15 5 13 6 10 9 The figure shown represents the payoffs involved when Sarah and Joe work on a school project together for a single grade. They both will enjoy a higher grade when more effort is put into the project, but they also get pleasure from goofing off and not working on the project. The payoffs can be thought of as the utility each would get from the effort they individually put forth and the grade they jointly receive. What payoff can we predict Joe will receive as the outcome of this game? Multiple Choice О О 5 7 О 13

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a) Consider that 2 agents make up the demand side of a market. Person A's marginal benefits are MBA 60-0.25Q, and person B's marginal benefits are MBB 60 GB Find  market-level marginal benefits

1. The table below shows a prisoner's dilemma in normal form. Players 1 and 2 each choose between D and C. D C D 2,2 1,10 10, 1 5,5 Answer the following questions. Remember to explain your reasoning. (a) If the game is played only once, what is the equilibrium in dominant strategies? (b) If the game is played three times in a row, what action does each player choose in every round? Suppose that the game is repeated indefinitely. The players do not discount the future. How- ever, the game ends with probability p € (0, 1) after each round. Assume that each player uses the following grim-trigger strategy. Each player chooses C in the first round. Each player chooses C in the current round if both players chose C in every previous round. Each player chooses D in the current round if either player chose D in some previous round. (c) If p = 1, is it optimal for each player to use the grim-trigger strategy above given that the other player uses the grim-trigger strategy above? [Hint: compare…

Please no written by hand solution A local KFC franchisee is evaluating the number of fried chickens to produce each day. The following table shows the 4 alternatives, the states of nature and their payoffs       Daily Supply           40 50 60 70 Daily Demand 40 $80 $0 -$80 -$160   50 $80 $100 $20 -$60   60 $80 $100 $120 $40   70 $80 $100 $120 $140 What would your decision be if the following rules are applied? (show your calculation) Maximax Maximin La Place Minimax-regret

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“To be or not to be, that is the question.” Imagine that in answering this question Hamlet had the following data to consider. Hamlet must choose either “To Be” or “Not to Be.” If Hamlet chooses “To Be” then his enemy the King will make a decision to either “Kill” Hamlet or let him “Live.” If Hamlet is killed by the King his payoff in this game is 200 since he will have been killed by the King who is his uncle and who also killed Hamlet’s father, the King’s brother, who was the prior king. If the King decides to let Hamlet Live then Hamlet will be able to avenge his father’s death and his payoff will be +300. Hamlet also considers suicide an option but given the uncertainty of the afterlife if he chooses not to be then his payoff is +100 since his doesn’t what the afterlife holds for one who kills himself. Draw the complete game tree for this situation. Be sure to accurately label the tree and include the payoffs. Assume Hamlet will choose the course of action that offers the highest…