Please try to solve it complete in 2 hours 1:34 AM O M O ..4G+62Edit501. Consider the following game between Player I and Player 2. The game will be repeatedinfinitely and the two players adopt Tit For Tat as the trigger strategy. The two players discountthe future at a discount rate of 5%. At period 0, does Player 1 have any incentive to defectforever? Explain.Player 2DA$1000$1000$6000$500Player 1-$500$6000$5000$50002. Consider the used-car market for the 2017 Citrus described in class. Each owner of an orangeCitrus values it at $12,500; she is willing to part with it for a price greater than or equal to$12,500. Similarly, cach owner of a lemon Citrus values it at $3,000. There is now a surge indemand for used Citruses: buyers would now be willing to pay up to $18,000 for an orange and$8,000 for a lemon. All else remains identical to the previous (i.e., in-class) example.(a) What price would buyers be willing to pay for a 2017 Citrus of unknown type if the fractionof oranges in the population, f. were 0.6?(b) Will there be a market for oranges if f=0.6? Explain.(c) What price would buyers be willing to pay if f= 0.2?(d) Will there be a market for oranges if f=0.2? Explain.(e) What is the minimum value of f such that the market for oranges does not collapse?(1) Explain why the increase in the buyers' willingness to pay changes the threshold value of f.where the market for oranges collapses (as compared to the in-class example).3. Suppose two types of college students, A (Able) and C (Challenged) are applying to acompany for jobs. The company is willing to pay $150,000 a year for A type candidates and$75,000 a year for C type candidates. Other employment opportunities yield the A types a salaryof $120,000 and C types a salary of $50,000. The cost to the A types to take a tough course isequivalent to $3,000 a year of salary and the cost to the C types to take a tough course isequivalent to $12,000 a year of salary.(a) What is the basic game- theoretic problem that this situation describes?The company is trying to decide the optimal number of tough courses to require the students totake so as to be able to screen the A type candidates from the C type candidates.(b) Write down the Incentive Compatibility constraint and the Participation Constraint for the Atype student? Explain your steps.(c) Write down the Incentive Compatibility constraint and the Participation Constraint for the Ctype student? Explain your steps.(d) What is the optimal number of courses that the company should require?4. North Koreas's leader Kim Jong-un must decide whether to keep or dismantle North Korea'snuclear weapons, while China must decide whether or not to provide economic aid to NorthKorea. The ordinal payoff matrix (with 4 being the highest payoff and 1 being the lowest payoff)is shown below.CHINAAidDon't aidDismantle3,41,3NORTH KOREA[Kim Jong-unDon'tdismantle4,22,1DDDOToolsMobile ViewSharePDF to DOCEdit on PC

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1. Consider the following game between Player I and Player 2. The game will be repeated infinitely and the two players adopt Tit For Tat as the trigger strategy. The two players discount the future at a discount rate of 5%. At period 0, does Player I have any incentive to defect forever? Explain. c Player 2 A S1000 $1000 S6000 $500 Player 1 B -S500 $6000 S5000 $5000

1. Consider the following game between Player I and Player 2. The game will be repeated infinitely and the two players adopt Tit For Tat as the trigger strategy. The two players discount the future at a discount rate of 5%. At period 0, does Player I have any incentive to defect forever? Explain. c Player 2 A S1000 $1000 S6000 $500 Player 1 B -S500 $6000 S5000 $5000

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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