4. Do you agree with the statement that “the best strategy is to know what you should not do”? Try to justify your own view and possibly illustrate with a real world example
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4. Do you agree with the statement that “the best strategy is to know what you should not do”? Try to justify your own view and possibly illustrate with a real world example
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- **Practice*** Amy and Bob are playing the following board game:(I) Amy starts. She has three possible actions: Pass, Attack, or Defend.(II) Bob observes what Amy chose, and then chooses between three actions with the same names: Pass, Attack, or Defend.(III) If either player passes, or one attacks and the other defends, then the game ends. But if either both players attack, or if both players defend, then Amy has to choose between two actions: Respond or Not Respond. The payoffs are as follows:- If both players pass, both players get a payoff of 0.- If a player attacks and the other player defends, the player that attacks gets a payoff of 1, while the player that defended gets a payoff of 2.- If a player passes but the other player attacks or defends, the player who passes gets a payoff of -1, and the player who attacked or defended gets a payoff of 3.- If both players attack or both players defend:– If Amy responds, she gets a payoff of 4, and Bob gets a payoff of 0.– If Amy does…10 please quickly thanks ! Researchers have observed that both household consumers and large-scale business consumers do not change their consumption of water even when the price of water increases dramatically. Even when individuals express an interest in consuming less water in order to be more environmentally friendly, water consumption rarely declines. One reason why we may see individuals making sub-optimal decision regarding water consumption is: a.There is a lack of feedback. b.All of these are true. c.Users may be mindless about water consumption. d.The benefits and costs often occur at different times.1. We can use game theory to model everyday interactions. Consider a game that you're well familiar with: The choice of which side of a hallway to select if someone is coming from the other direction and has not yet made their own selection clear. How many Nash equilibria are in this game? Remember, an outcome is a Nash equilibrium if nobody has a profitable unilateral deviation; if no one has reason to be the only one to change what they're doing. 2. Consider following scenario which we can think of as a game played between two oligopoly firms, Timmer's snow removal & Jack's snow removal services. It costs Timmer $200 per customer per year. It costs Jack's $225 per customer per year. If the firms compete by strategically setting prices, what Nash equilibrium price do we expect? Explain. Remember, an outcome is a Nash equilibrium if nobody has a profitable unilateral deviation; if no one has reason to be the only one to change what they're doing.
- Exercise 4.1 Amy and Bill simultaneously write a bid on a piece of paper. The bid can only be either 2 or 3. A referee then looks at the bids, announces the amount of the lowest bid (without revealing who submitted it) and invites Amy to either pass or double her initial bid. - The outcome is determined by comparing Amy's final bid to Bill's bid: if one is greater than the other then the higher bidder gets the object and pays his/her own bid; if they are equal then Bill gets the object and pays his bid. Represent this situation by means of two alternative extensive frames. Note: (1) when there are simultaneous moves we have a choice as to which player we select as moving first: the important thing is that the second player does not know what the first player did; (2) when representing, by means of information sets, what a player is uncertain about, we typically assume that a player is smart enough to deduce relevant information, even if that information is not explicitly given to…1. Road construction is going on Riccarton Road. 100 Uber drivers want to drop their passengers at the airport. Each driver is deciding whether to take Riccarton Road or take Blenheim Road. The cost of travelling through Riccarton Road is $10 (additional fuel required due to slow traffic), while the Blenheim Road route has a low fuel cost (theoretically let's assume $0) but takes more time to reach the airport. In deciding on a route, each driver cares only about income, denoted i, and his travel time, denoted t (where we have made the dollar value of one unit of travel time equal to 1). Driver's payoff is assumed to be his/ her profit (income - cost of travelling, including travel time). Assume that each driver has same income of $500. If m drivers are on Riccarton Road, the travel time for a driver on Riccarton Road is assumed to be m (in dollars). In contrast, if m drivers take Blenheim Road, the travel time for those on the Blenheim Road is 2m (again, in dollars). Drivers make…N=2 video broadcasting websites, You and Twi, must decide the number of minutes of ads to be displayed for every video that the user elects to watch. Let tY be the number of ad-minutes per video set by You, and tT the number of ad-minutes per video set by Twi. Streaming one video costs You cY=0.02, while it costs Twi cT=0.03. There are 100 million potential users, and each watches videos according to the following demand curves: qY((tY,tT) =10-2tY+tT=10-2tT+tY a- What is the cross-price elasticity between You and Twi? b- Suppose, for now, that You and Twi enter an (illegal) agreement by which they set tY=tT=t Derive the total number of users in the market as a function of t. Derive the profits for each website as a function of t. c- Now let the two platforms compete by each setting their number of ad-minutes: i. What is the best reply of You? What is the best reply of Twi? ii. Find the Nash Equilibrium of the game. iii. How many total users choose You and how many total users choose…
- 4. Sonia the Terrible lands her ship and crew of scurvy-pirate raiders onto a foreign beach. Up on the headland is a village, led by Jen the Brave. At this point, Sonia has a choice: she can SLASH her water barrels, eliminating her water supplies; or she can NOT SLASH, which keeps her water supplies completely intact. Having seen the action taken by Sonia, Jen can choose to CHARGE or to WAIT. The payoffs are as follows: if Sonia the Terrible chooses to SLASH and Jen CHARGES, the payoffs are (100, 20) to Sonia and Jen, respectively. If Sonia SLASHES and Jen WAITS, the payoffs are (10, 30). On the other hand, if Sonia chooses to NOT SLASH and Jen CHARGES, the payoff is (20, 15). If Sonia opts to NOT SLASH and Jen chooses to WAIT, the payoffs are (40, 10), respectively. What is the subgame perfect (or credible) equilibrium outcome? a. Sonia the Terrible chooses to SLASH; Jen the Brave chooses to CHARGE b. Sonia the Terrible chooses to NOT SLASH; Jen the Brave chooses to WAIT c. Sonia the…1. Let's go back to the game played between Charlotte (automobile driver) and Erica (bicyclist). Assume that they are traveling at night. Charlotte could reduce the change of hitting Erica by installing brighter lights. Erica can reduce the change of being hit by wearing a vest. Suppose the cost of brighter lights is $30, and the cost of a vest is $15. The damage done to Erica if there is an accident is $1,000. The table below shows the probabilities of an accident, which depend on the level of care taken by each: Normal Lights Bright Lights a. What is the efficient level of precaution taken by both sides? Charlotte No Vest 8% 3% Erica Vest 5% 1% b. For each of the following rules, determine what level of precaution Charlotte and Erica will take. i. negligence w/ a defense of contributory negligence ii. strict liability with contributory negligence iii. comparative negligence For each rule you will have to complete the payoff tables (I will provide templates on the exam), and then find…Chapter 6: Rational Choice under Risk & Uncertainty Behavioral & Experimental Econ 2) Suppose you are considering taking the train (at a cost of $50) or driving your car (at a cost of $10) but you do not have the money to pay for car insurance. If you are caught driving your car without insurance, you will receive a $1,000 ticket. a. What will you choose if you are maximax (optimistic) decision-maker? b. What will you choose if you are a maximin (pessimistic) decision-maker? c. What will you choose if you are a minimax risk (regret) decision-maker? d. What will you choose if you estimate that there is a 2% chance of being caught driving without insur and you make your decision based on expected value? e. Determine the probability of detection that would make you indifferent between taking the train or work (still from the perspective of expected value). f. Returning to part (b), you now want to analyze your decision with a maximin decision criterion fran but also using an expected…
- Economics 4. Suppose you are going to play a game with four other people in our class. The rule of the game is that: each of them will choose a number between and 100 (including 0 and 100). The winner of the game is the one whose chosen number is the closest to [20+* average of everyone's chosen number]. The winner can get $100 form Josie. Everyone choosing 20 is a Nash Equilibrium. (a) True (b) False please explain it in detail.What is Ann's maximin strategy? Game Bob R Ann U 10,-1 4, 4 D 4, 1 8, -1 Select one: a. none of the other answers b. 2/5 U+ 3/5 D c. 3/5 U + 2/5 D d. 4/7 U + 3/7 D e. 2/7 U + 5/7 DExplain why and also explain when other three options would be right ?