Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 13, Problem 11Q
To determine
Meaning of first mover advantage and the importance of commitment in games with first mover advantage.
(a)
To determine
Existence of first mover advantage in a game of rock, paper, scissors.
(b)
To determine
Existence of first mover advantage in a market-entrance situation.
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Students have asked these similar questions
Rock-paper-scissors is a game in which players typically use mixed strategies. Can you think of other examples? What are some of the characteristics of games that usually involve playing mixed strategies?
Use the following normal-form game to answer the following questions. a. For what values of x is strategy D (strictly) dominant for player 2? b. For what values of x is strategy B (strictly) dominant for player 1? c. For what values of x is (B, D) the only Nash equilibrium of the game?
1. Two electricity firms compete in the same market and are deciding their level of advertising
in order to increase customers and profits. The following matrix shows the profits (in
millions) according to the strategy chosen:
Firm
1
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Low
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Aggressive
Advertising
Firm 2
Low
Advertising
15, 15
20, -2
Aggressive
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a. Identify the one-shot Nash equilibrium. Comment.
b. Suppose the players know this game will be repeated exactly 10 times. Can they achieve
payoffs that are better than the one-shot Nash equilibrium? Explain.
c. Suppose this game is infinitely repeated and the interest rate is 5%. Can the players
achieve the collusive outcome? Explain.
Chapter 13 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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