X 8.7 Return to the game with two neighbors in Problem 8.5. Continue to suppose that player i's average benefit per hour ofwork on landscaping is 10-, +2 Continue to suppose that player 2's opportunity cost of an hour of landscaping work is 4.Suppose that player I's opportunity cost is either 3 or 5 with equal probability and that this cost is player 1's privateinformation. a. Solve for the Bayesian-Nash equilibrium. b. Indicate the Bayesian-Nash equilibrium on a best-responsefunction diagram. c. Which type of player 1 would like to send a truthful signal to player 2 if it could? Which type would like tohide his or her private information?

Answered: Image /qna-images/answer/3e67a2ff-4bee-47c8-bdcd-4a756e02a226.jpg

Answered: X 8.7 Return to the game with two…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.7P

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In Las Vegas, roulette is played on a wheel with 38 slots, of which 18 are black, 18 are red, and 2 are green (zero and double-zero). Your friend impulsively takes all $361 out of his pocket and bets it on black, which pays 1 for 1. This means that if the ball lands on one of the 18 black slots, he ends up with $722, and if it doesn't, he ends up with nothing. Once the croupier releases the ball, your friend panics; it turns out that the $361 he bet was literally all the money he has. While he is risk-averse - his utility function is u(x) =, where x is his roulette payoff - you are effectively risk neutral over such small stakes. a. When the ball is still spinning, what is the expected profit for the casino? b. When the ball is still spinning, what is the expected value of your friend's wealth? c. When the ball is still spinning, what is your friend's certainty equivalent (i.e., how much money would he accept with certainty to walk away from his bet). Say you propose the following…
For the operating system game, let us assume Windows is more superior than Mac intrinsically and that network effects are stronger for Macs. These modifications are reflected in different payoffs. Now, the payoffs from adopting Windows is 30 + 10 × w and from adopting Mac is 20 × m. n consumers are simultaneously deciding between Windows and Mac, where n > 10. (a) Is there a Nash equilibrium in which everyone buys Windows? Explain your answer. (b) Is there a Nash equilibrium in which everyone buys Mac? Explain your answer. (c) Is there a Nash equilibrium in which some consumers buy Windows and some consumers buy Mac? Explain your answer.
Consider the following volunteer-dilemma game among 5 players. A benefit B=5 can be enjoyed if at least one of the 5 players decides to help. More than one person helping is redundant. The player that chooses to help incurs a cost, C=1 (note: B>C>0). If no one helps, all players’ utility is 0. a) There are _____ pure-strategy equilibria in this game. b) In the symmetric mixed-strategy equilibrium, each player helps with probability _______ (round your answer to the second nearest decimal). c) In the symmetric mixed-strategy equilibrium, the probability that no one helps is _______ (round your answer to the second nearest decimal).
Write out the extensive form of a game between a farmer (playing in the first round) and nature (playing a mixed strategy in the second round). Assume that the farmer can either pay a cash rent of $1500 for land (English system) or 1/2 of crop production to the landlord (sharecropping). Assume the farmer is planting corn and will produce 2 tons of corn. Assume that nature has a 50% chance of playing a strategy in which the price of corn is $3500/ton and a 50% chance of playing a strategy in which the price of corn is $500/ton. The farmer keeps any money left after paying cash rent and sells any corn left after paying the landlord in sharecropping. What is the most that a risk neutral farmer would be willing to pay for an accurate prediction of the price of corn in problem 1 before choosing whether to pay cash rent or sharecrop?
Common pool resource game) Consider a common pool resource game with two appropriators. (If you don’t know what is a common pool resource, read the Wikipedia article about the ”Tragedy of the Commons”.) Each appropriator has an endowment e > 0 that can be invested in an outside activity with marginal payoff c > 0 or into the common pool resource. Let x ∈ X ⊆ [0, e] denote the player’s investment into the common pool resource (likewise, y denotes the opponent’s investment). The return from investment into the common pool resource is x x+y · ((x + y) − (x + y) 2 ). So the symmetric payoff function is given by π(x, y) = c · (e − x) + x x+y · ((x + y) − (x + y) 2 ) if x > 0 and c · e otherwise. Assume 1 − e < c < 1. Find Nash equilibrium of the game. Proceed by deriving the best response correspondences first. How does Nash equilibrium depend on parameters c and e (varying one at a time and keeping the others fixed)?
3. Two individuals are planning to start a business. The earnings from a grocery store business would be $30,000 for each, but the business requires two people (one to watch over the stock and the other to act as a cashier). Each individual could instead start an mpesa business. The take from mpesa business is only $3000 but can be done with one person acting alone. i) Write down the payoff matrix for this game ( ii) Solve the Nash equilibrium
Consider the following simultaneous move game where player 1 has two types. Player 2 does not know if he is playing with type a player 1 or type b player 1. Player 2 C D Player 1 A 12,9 3,6 B 6,0 6,9 C D A 0,9 3,6 B 6,0 6,9 Type a Player 1 Prob = 2/3 Type b Player 1 Prob = 1/3 Find the all the possible Bayesian Nash Equilibriums (BNE) of this game.
1.a) If the three executives of a fraudulent organization report nothing to the authorities, each gets a payoff of 100. If at least one of them blows the whistle, then those who reported the fraud get 28, while those who didn’t get -100. Suppose they play a symmetric mixed-strategy Nash equilibrium where each is silent (does not report fraud) with probability p. What is p?A, 0.1B, 0.28C, 0.5D, 0.8 b) In a two-player game, with strategies and (some known and some unknown) payoffs as shown below, suppose a mixed-strategy equilibrium exists where 1 plays C with probability 3/4, and Player 2 randomizes over X, Y, and Z with equal probabilities. What are the pure-strategy equilibria of this game? A, (A, Y) and (B, X)B, (A, Z) and (C, Y)C, (B, X) and (C, X)D, (C, X) and (C, Y)
Consider a normal form game in which player 1 has two strategies, A1,B1 and player 2 has two strategies, A2,B2. Suppose that A1 is a best response to A2 and A2 is a best response to A1. Do we know whether A1 is rationalizable?
Return to the game between Monica and Nancy in Exercise U10 in Chapter 5. Assume that Monica and Nancy choose their effort levels sequentially instead of simultaneously. Monica commits to her choice of effort level first. On observing this decision, Nancy commits to her own effort level. What is the subgame - perfect equilibrium of the game where the joint profits are 5m + 4n+ mn, the costs of their efforts to Monica and Nancy are m2 and n2, respectively, and Monica commits to an effort level first? Compare the payoffs to Monica and Nancy with those found in Exercise U10 in Chapter 5. Does this game have a first-mover or second - mover advantage? Using the same joint profit function as in part (a), find the subgame - perfect equilibrium for the game where Nancy must commit first to an effort level. U10. Return to the game between Monica and Nancy in Exercise U10 in Chapter 5. Assume that Monica and Nancy choose their effort levels sequentially instead of simultaneously. Monica commits…
Question 2. Two students are working together to submit their Microeconomics mid-semester group coursework. Each student i can put in the effort x; that costs c(x;), in which x; E [0, 1]. This gives each student the utility of u(x1, x2). Formu- late this situation as a strategic game.
Explain whether the statement is true or false and explain why? Statement 1: If a game has a Pareto efficient outcome, there exists a Nash equilibrium that leads to this outcome. Statement 2: If someone has linear indifference curves between contingent commodity bundles, then she must be risk averse and the risk premium is positive. Statement 3: Suppose we have a game with three pure strategies. In a (fully) mixed strategy Nash equilibrium, a player is indifferent between her three pure strategies

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