Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 10DQ
(a)
To determine
The impact of revenge on the interest of an individual.
(b)
To determine
Advantages of having reputation for irrationality.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Sam and Sarah are thinking about getting married. However if either of them cheats on the other, they would get a payoff of 10, while the other person gets zero. If neither cheat, they stay with each other and get a payoff of 7 each and if both cheat, the relationship falls apart and each get a payoff of 1.
What is the Nash equilibrium of this game?
a. Cheat, Cheat
b. Not cheat, Not cheat
Sam cheats, Sarah doesn't
Sarah cheats, Sam doesn't
Answer all the questions, show all the working.
Consider the following game in normal form.
Not cooperate
Cooperate
Not cooperate
20,20
50,0
Cooperate
0,50
40,40
What is Nash equilibrium? Is it efficient? Why?
What needs to be complied with so that the players would like to cooperate? What happens when one of the players does not cooperate? Why? Define trigger strategy.
Calculate the discount factor (δ) that would make both players decide to cooperate.
i.
ii.
QUESTION ONE
A. A Nash equilibrium is a strategy profile such that every player's strategy is the best
response to all the other players. It requires that each player makes a best
response and that expectations regarding the play of other players are correct.
Below is the table showing strategies and payoff for Player 1 and Player 2.
PLAYER 1
R1
R2
R3
R4
C1
0,7
5,2
7,0
6,6
C2
2,5
3,3
2,5
2,2
PLAYER 2
C3
7,0
5,2
0,7
4,4
CA
6,6
2,2
4,4
10,4
REQUIRED;
Transform the normal form game above into an imperfect extensive game form
Find the Nash equilibrium for the game above using iterative deletion of strictly
dominated strategies.
Find the Nash equilibrium using brute force or cell by cell inspection.
Knowledge Booster
Similar questions
- Can you explain the "altruism and reciprocity" game theory, and provide an example? Is this the same as the "trust game?"arrow_forwardThis question is about game theory in economics. please show all your workings and answersarrow_forwardQUESTION 14 Which of the following is the Nash equilibrium of the game in the picture? Du Q = 30 Q = 40 Q = 30 du's profit = 900 Etisalat du's profit = 1000 Etisalat's profit = 900 Etisalat's profit = $750 Q = 40 Etisalat's profit = 1000 du's profit = 750 a. Du chooses 30, Etisalat chooses 40. b. Du chooses 30, Etisalat chooses 30. C. Du chooses 40, Etisalat chooses 40. d. Du chooses 40, Etisalat chooses 30. du's profit = 800 Etisalat's profit = 800arrow_forward
- Roger and Rafael play a game with the following rules. Roger is given $250 to divide between himself and Rafael. Rafael does not get to choose but he can reject Roger’s offer if he does not like it. If Rafael rejects, both get nothing. If Rafael accepts, both get the split that Roger decided. a. What is this game called? b. Find all Nash equilibria for this game. c. When this game is played in the real world, do the predictions in part 1b materialize? Why/why not? d. Are all Nash equilibria in part 1b Pareto Optimal? Explainarrow_forward5. When McDonald's Corp. reduced the price of its Big Mac by 75 percent if customers also purchased French fries and a soft drink, The Wall Street Journal reported that the company was hoping the novel promotion would revive its U.S. sales growth. It didn't. Within two weeks sales had fallen. Using your knowledge of game theory, what do you think disrupted Mcdonald's plans?arrow_forwardUse the following payoff matrix for a one-shot game to answer the accompanying questions. a. Determine the Nash equilibrium outcomes that arise if the players make decisions independently, simultaneously, and without any communication. Which of these outcomes would you consider most likely? Explain. b. Suppose player 1 is permitted to “communicate” by uttering one syllable before the players simultaneously and independently make their decisions. What should player 1 utter, and what outcome do you think would occur as a result? c. Suppose player 2 can choose its strategy before player 1, that player 1 observes player 2’s choice before making her decision, and that this move structure is known by both players. What outcome would you expect? Explain.arrow_forward
- Game theory Consider a simultaneous move game with two players. Player 1 has three possible actions (A, B, or C) and Player 2 has two possible actions (D or E.) In the payoff matrix below, each cell contains the payoff for Player 1 followed by the payoff for Player 2. Player 2 7. Player 1 A B C D -3, -3 0, -11 -4, 3 -11, E 0 -7, -7 -12, 0 (a) Identify any dominated strategies in this game. If there are none, state this clearly. (b) Identify any pure strategy Nash Equilibria in this game. If there are none, state this clearlyarrow_forwardUse the following extensive-form game to answer the following questions. a. List the feasible strategies for player 1 and player 2. b. Identify the Nash equilibria to this game. c. Find the subgame perfect equilibrium.arrow_forward9. Little Kona is a small coffee company that is consider- ing entering a market dominated by Big Brew. Each company's profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price: Little Kona Enter Don't Enter High Price Kona makes $2 million Kona makes zero Big Brew Brew makes $3 million Brew makes $7 million Kona loses $1 million Low Price Kona makes zero Brew makes $1 million Brew makes $2 millionarrow_forward
- The bimatrix represents a simultaneous move game between Rowena and Colin. Rowena's payoff is the left number in each cell. ROWENA Up Down 0.25Left +0.75Right 0.65Left +0.35Right Find Colin's mixed strategy that makes Rowena indifferent between a pure strategy of playing Up and a pure strategy of playing Down. 0.5Left +0.5Right Left 1,16 2,20 0.45Left +0.55Right COLIN Right 4,6 3,40arrow_forwardConsider a game between 2 payers (Ann and Bill) where each chooses between 3 actions (Up, Middle and Down). 1) Create a payoff matrix that reflects this. 2) Fill in payoff numbers that makes this game a Prisoner's Dilemma. 3) Explain why your game is a Prisoner's Dilemma.arrow_forwarda. Consider the following sequential game. Player 1 A B Player 2 Player 1 a a B Player 2 (4) () y i. Determine the subgame perfect Nash equilibria and their outcomes. ii. Determine the Nash equilibria of the game. For each of the Nash equilibria, argue why no player has a profitable deviation. ii. Determine which parts of the Nash equilibrium strategies involve uncredible threats.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning