Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 13, Problem 2Q
To determine
Explain whether a player’s best response is the same as the player’s dominant strategy.
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What is the difference, if any, between a dominant strategy and a Nash equilibrium? Give examples.
Consider a game where there is a dominant strategy equilibrium. You would then argue that, in equilibrium the following statement applies
Question options:
Each player gets the highest utility he can possibly get.
Total surplus is not necessarily maximized.
Total surplus is maximized.
At least one of the player gets the highest payoff he can reach.
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?
Chapter 13 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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Similar questions
- Suppose Proctor & Gamble (PG) and Johnson & Johnson (JNJ) are simultaneously considering new advertising campaigns. Each firm may choose a high, medium or low level of advertising. a. What are each firm’s best responses to its rival’s strategies? b. Does either firm have a dominant strategy? c. What is the Nash equilibrium in this game?arrow_forwardHow expected Nash Equilibrium would be achieved in case of game with no Nash Equilibrium?arrow_forwardConsider 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.arrow_forward
- What is the difference between a cooperative and a noncooperative game? Give an example of each.arrow_forwardIn a small town there are two pizza restaurants . If neither restaurant advertises, its revenue will not change. If only one firm advertises, the firm that advertises will double its revenue and the firm that doesn't advertise will see a decrease in its revenue, but if both firms advertise, their revenue will not change. What outcome would be predicted by game theory in this market? Both restaurants will advertise. Game theory would predict chat sometimes one restaurant would advertise, and the rest of the time both will advertise. Neither restaurant will advertise Game theory is only a theory and cannot predict real-world events. One restaurant will advertise.arrow_forwardwhat is the difference between nash equilibrium and dominated strategy?arrow_forward
- According to game theory, what do firms try to do? maximize their profits by acting in ways to minimize damage from competitors capture competitors markets by developing slightly differentiated products gain market shares through predatory pricing maximize market share through strategic advertising and product placementarrow_forwardTrue or false? If a game has a Nash equilibrium, that equilibrium will be the equilibrium that we expect to observe in the real world. False. People don’t always act in the way that a Nash equilibrium requires. People don’t always make the necessary calculations and they take into account the outcome of others. False. A Nash equilibrium is based on very strict assumptions that rarely hold in the real world. No real-world situation leads to a Nash equilibrium. True. As long as people are rational and have their own self-interest at heart, real-life games will result in the Nash equilibrium. True. Nash’s theory of equilibrium outcomes was derived from real-world interactions. The theory holds true for almost all real-world scenarios.arrow_forwardAssume a simultaneous-move game. Firm B Low Price High Price Firm A Low Price 10,10 100,2 High Price 2,100 90, 90 What is the Nash equilibrium of the game?arrow_forward
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