We will loosely model the petrol crisis the UK has recently experienced as a game. Start with a two-player case. Assume that there are two people living on an island and each person has two actions: keep buying petrol as normal or rush to the petrol station and fill up the tank. When both players buy as normal, the petrol supply would be enough for the two, and hence no single player has any incentives to rush. In fact, when all players keep buying as normal, rushing unilaterally will incur a small cost (e.g. one has to give up their normal routine, go to the gas station with half full tanks etc.). If one player rushes, however, the other has incentives to do so too, for waiting when the other player rushes results in the worst outcome for the player who waits. Create a game using this scenario assuming that players decide simultaneously. Assign payoffs for all possible strategy combinations, carefully arguing and justifying why you assigned a particular payoff to a particular strategy combination. Any reasonable payoffs are allowed, provided that the game is within the general framework given above and the payoffs are justified well. Find all Nash equilibria of the game you created. Now assume that players play this game indefinitely repeatedly so that after every round the probability that the game is repeated is w with 0
We will loosely model the petrol crisis the UK has recently experienced as a game. Start with a two-player case. Assume that there are two people living on an island and each person has two actions: keep buying petrol as normal or rush to the petrol station and fill up the tank. When both players buy as normal, the petrol supply would be enough for the two, and hence no single player has any incentives to rush. In fact, when all players keep buying as normal, rushing unilaterally will incur a small cost (e.g. one has to give up their normal routine, go to the gas station with half full tanks etc.). If one player rushes, however, the other has incentives to do so too, for waiting when the other player rushes results in the worst outcome for the player who waits. Create a game using this scenario assuming that players decide simultaneously. Assign payoffs for all possible strategy combinations, carefully arguing and justifying why you assigned a particular payoff to a particular strategy combination. Any reasonable payoffs are allowed, provided that the game is within the general framework given above and the payoffs are justified well. Find all Nash equilibria of the game you created. Now assume that players play this game indefinitely repeatedly so that after every round the probability that the game is repeated is w with 0
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.8P
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