Two friends, Albert (A) and Berta (B), have to decide on going to one- of three bars, Xenia's (X), Yara's (Y), or Zana's (Z). They decide to select a bar by alternatively vetoing bars until one remains. First Albert vetoes a bar. If at least two bars remain, then Berta vetoes another bar. That process continues until a single bar remains unvetoed. Suppose Albert prefers Xenia's to Yara's to Zana's and Berta prefers Zana's to Yara's to Xenia's. Assume that, for each of the two, going to their most preferred bar gives a utility of 2, going to their next preferred bar gives a utility of 1, and going to their least preferred bar gives a utility of 0. Model this as an extensive form game and find its Nash equilibria. Which of the Nash equilibria are subgame perfect?
Two friends, Albert (A) and Berta (B), have to decide on going to one- of three bars, Xenia's (X), Yara's (Y), or Zana's (Z). They decide to select a bar by alternatively vetoing bars until one remains. First Albert vetoes a bar. If at least two bars remain, then Berta vetoes another bar. That process continues until a single bar remains unvetoed. Suppose Albert prefers Xenia's to Yara's to Zana's and Berta prefers Zana's to Yara's to Xenia's. Assume that, for each of the two, going to their most preferred bar gives a utility of 2, going to their next preferred bar gives a utility of 1, and going to their least preferred bar gives a utility of 0. Model this as an extensive form game and find its Nash equilibria. Which of the Nash equilibria are subgame perfect?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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