Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 4CACQ
a)
To determine
The one-shot Nash equilibrium.
b)
To determine
If it is known by the player that game is repeated three times will it lead to payoff that is better than one-shot Nash equilibrium.
c)
To determine
Can the players achieve payoff that is better than the one-shot Nash equilibrium if the game is repeated infinite times with 6 percent interest rate.
d)
To determine
If the players have no knowledge about the times a game is repeated but the players know that the probability of ending a game after a given pay is
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Students have asked these similar questions
Consider 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.
Consider a game where player A moves first, choosing between Left and Right. Then, after observing player A’s choice, player B moves next choosing between Up and Down. Which of the following is true?
This is a game where players A and B have the same number of strategies.
Player A will get a higher payoff than player B as A moves first.
This is game will only have one Nash equilibrium.
This is a game of perfect information.
If a player does not have a dominant strategy, can the game still have a Nash equilibrium?
No. At least one player must have a dominant strategy for the outcome to be a Nash equilibrium.
Yes. There is no need for a dominant strategy to exist in order to have a Nash equilibrium. The outcome is a Nash equilibrium because each player has made his or her optimal choice based on the optimal choice of the other player.
No. If there is no dominant strategy, there is no predictable outcome and therefore no Nash equilibrium.
Yes. A Nash equilibrium is possible only if neither player has a dominant strategy. If a dominant strategy exists, it is no longer a Nash equilibrium.
Chapter 10 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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- True 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_forwardSuppose that you and a friend play a matching pennies game in which each of you uncovers a penny. If both pennies show heads or both show tails, you keep both. If one shows heads and the other shows tails, your friend keeps them. Show the pay- off matrix. What, if any, is the pure-strategy Nash equilibrium to this game? Is there a mixed-strategy Nash equilibrium? If so, what is it?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_forward
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- Answer all the questions, show all the working. Consider 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_forwardHow to answer questions 2,3 and 4?arrow_forwardPlayer 2 1 2 3 1 (0,2) (1,0) (0,2) (0,2) Player 1 2 (1,0) (1,0) 3 (0,2) (1,0) (0,2) 1. Find all pure. strategy Nash equilibria 2. Does the game have a mixed strategy equilibrium? If so, find one. Otherwise, provide an explanationarrow_forward
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