Pearson eText Microeconomics -- Instant Access (Pearson+)
9th Edition
ISBN: 9780136879572
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON+
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Chapter 13, Problem 3RQ
To determine
Nash equilibrium and dominant strategy.
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Explain the meaning of a Nash Equilibrium. How does it differ from and equilibrium in dominant strategies?
What is the difference, if any, between a dominant strategy and a Nash equilibrium? Give examples.
For the game below, find any Nash equilibrium. Show your work and report any Nash equilibrium strategies.
Chapter 13 Solutions
Pearson eText Microeconomics -- Instant Access (Pearson+)
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- Define a dominant strategy and Nash equilibrium. Can two firms interacting with each other have no Nash equilibria if both have a dominant strategy?arrow_forwardYou have just played rock, paper, scissors with your friend. You chose scissors and he chose paper, so you won. Is this a Nash equilibrium? Explain why or why not.arrow_forwardNash equilibrium refers to the optimal outcome of a game where there is no incentive for the players to deviate from their initial strategy. An individual (or player) can receive no incremental benefit from changing actions, assuming other players remain constant in their strategies. Given this premise, can there be a no Nash equilibrium?arrow_forward
- Imagine a small town with three car repair shops competing for a limited number of customers. Explain why the three shops working together to keep their prices high is unlikely to be a Nash equilibrium.arrow_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_forwardwhy is a nash equilibrium stablearrow_forward
- Find any Nash equilibria in the game below. Firm B Co-operate Don’t co-operate Firm A Co-operate 60 60 0 80 Don’t co-operate 80 0 10 10 Answer a. There is one Nash equilibrium: both firms don't co-operate. b. There are no Nash equilibria. c. There are two Nash equilibria: one firm co-operates and the other firm doesn't co-operate. d. There are two Nash equilibria: (i) both firms co-operate and (ii) both firms don't co-operate.arrow_forwardFind any Nash equilibria in the game below. Firm B Co-operate Don’t co-operate Firm A Co-operate 60 60 0 80 Don’t co-operate 80 0 10 10 a. There is one Nash equilibrium: both firms don't co-operate. b. There are no Nash equilibria. c. There are two Nash equilibria: one firm co-operates and the other firm doesn't co-operate. d. There are two Nash equilibria: (i) both firms co-operate and (ii) both firms don't co-operate.arrow_forwardRefer to the accompanying payoff matrix. Which of the following is a Nash equilibrium? Company A Strategy 1 Strategy 2 Strategy 1 Company A's Profit: $8 million Company B's Profit: $9 million Company B Company A's Profit: $10 million Company B's Profit: $8 million None of the above, Strategy 2 Company B's Profit: $8 million Company A's Profit: $7 million Company B's Profit: $7 million Company A's Profit: $8 million Company A chooses Strategy 1 and Company B chooses Strategy 1. Company A chooses Strategy 2 and Company B chooses Strategy 2. Company A chooses Strategy 1 and Company B chooses Strategy 2. Company A chooses Strategy 2 and Company B chooses Strategy 1.arrow_forward
- 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?arrow_forwardWhat is the distinctive characteristic of the Nash equilibrium?arrow_forwardFind all the Nash equilibria (in the strategic form) and the subgame perfect nash equilibria in the following game. Are they the same ?arrow_forward
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