Consider the following centipede game consisting of two players, Pl and P2. The left/rightnumber each terminal node represents Pl's/P2's payoff, respectively. Then, answer thefollowing questions of [D5] and [M5]-|M8]:P1GP2P1G-(0, 2)D(2, 0)(1, 1)(4, 0)Suppose that P2 chooses G or D randomly. Then, what is the Pl's best responseof P1 for the P2's choice? And explain why.We assume that random choice is level-0 in the level-k theory. Then, answer theP2's choice in level-2.(a) D (b) G(c) random choice on (G, D) (d) G with probability 1/3Answer all the properties of Nash equilibrium and subgame perfect equilibriumwhich is derives from the backward induction.(a) All subgame perfect equilibria are Nash equilibria in any game.(b) All Nash equilibria are subgame perfect equilibria in any game.(c) There is always a unique Nash equilibrium in any game.(d) There exist pure-strategy Nash equilibria in any game.(e) The Nash equilibrium in prisoners' dilemma game is socially optimal.(f) Nash equilibria always predicts people's behavior in a real world.(g) Iterated elimination of strictly dominated actions always leads identicalresults which is independent of orders of elimination.(h) None

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Consider the following centipede game consisting of two players, Pl and P2. The left/right number each terminal node represents Pl's/P2's payoff, respectively. Then, answer the following questions of [D5] and [M5]-[M8]:

Consider the following centipede game consisting of two players, Pl and P2. The left/right number each terminal node represents Pl's/P2's payoff, respectively. Then, answer the following questions of [D5] and [M5]-[M8]:

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 3MC

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Suppose that Teresa and Caroline are both in the public eye. They get offers to sell secrets of the other to tabloids. If both keep the secrets, they are both better off than if they get exposed. If only one is exposed, the other person is better off than if no one was exposed. Their payoffs from each option are given in the payoff matrix. Suppose that Caroline and Teresa play the game over four television seasons, where each season is a new game. Consider the scenarios. Remember, a tit‑for‑tat strategy is one where the person starts by cooperating and then plays whatever strategy the other firm played last. Over four seasons, how much will Caroline make if she plays a tit‑for‑tat strategy and Teresa always exposes? $_______ Over four seasons, how much will Caroline make if she and Teresa both always expose? $_________ Does Caroline have a dominant strategy when she and Teresa play for four seasons? No, there is no dominant strategy…
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