Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 13, Problem 11E
To determine
To describe:The relationship between Nash concept of best reply response and avoiding the maximum regret.
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Which of the following is FALSE for the grim trigger strategy and the infinite horizon repeated Prisoner's Dilemma game illustrated above?
A.
In the grim trigger strategy profile, if a player chooses D in a period, then both players chooses D forever after that period
B.
The threshold discount factor for sustaining cooperation under grim trigger strategy depends on the utility numbers in the stage game
C.
If all utility numbers remain the same but 3 is replaced by 5 in the stage game, then cooperation CANNOT be sustained in this game for all possible values of the discount factor.
10) Consider a repeated game in which the following one-shot game between two players is repeated "infinitely." Denote by "d" the discount factor. (Assume both players have the same discount factor.)
Player 2
Cooperate
Defect
Player 1
Cooperate
5, 4
0, 5
Defect
6, 0
1, 1
The two players try to support cooperation by using "grim trigger strategy" as discussed in class. Answer YES or NO to each of the following three questions.
(a) Can they support cooperation if the common discount factor, d, is equal to 0.23?
(b) Can they support cooperation if the common discount factor, d, is equal to 0.4?
(c) Can they support cooperation if the common discount factor, d, is equal to 0.15?
Two firms are competing to establish one of two new wireless communication standards, A or B. A strategy is a choice of standard, and an outcome of this game is a choice of standard by each firm – for example, (A, B) represents the case where Firm 1 decides to develop standard A and Firm 2 develops standard B. Here, the first letter will always correspond to Firm 1’s decision, and the second letter to Firm 2’s decision. Firm 1 has the following preferences over outcomes, in order of highest to lowest preferred: it prefers (A, A) to (B, A) to (A, B) to (B, B). Firm 2 prefers (A, B) to (A, A) to (B, A) to (B, B). Suppose that firms simultaneously decide which standard to develop. What is the pure strategy Nash equilibrium?
Chapter 13 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Similar questions
- Consider a simultaneous move game with two players. Player 1 has three possible actions (A, B, or C) and Player 2 has two possible actions (D or E.) In the payoff matrix below, each cell contains the payoff for Player 1 followed by the payoff for Player 2. Identify any dominated strategies in this game. If there are none, state this clearly.arrow_forwardExplain all will rate what is always true for a pure nash equilibrium of a two-person non zero-sum game A.No player can improve his payoff with a unilateral change of strategy B. it is a Pareto maximum of the payoff matrix C. No player can worsen the payoff of his opponent with a unilateral change of strategy D. It gives worse payoffs to both players than any berge equilibriumarrow_forwardDetermine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question.A Republican and a Democratic candidate are running for office in a heavily Republican county. A recent newspaper poll comparing their views on taxes and welfare reform showed that when compared on taxes or on welfare reform, the Republican leads by 20%. When comparing the Democrat on welfare reform to the Republican on taxes, the Republican leads by 35%. But when comparing the Democrat on taxes to the Republican on welfare reform, the Republican leads by only 15%. Use this information to decide what each candidate should discuss at their next debate. (Let T represent taxes and W represent welfare reform.) Democrat T W Republican T W % % % % =arrow_forward
- Consider the following payoff matrix that is below : A. Does Player A have a dominant startegy? Explain why or why not b. Does player B have a dominant strategy? Explain why or why not. Player B Strategy 1 2 Player A Strategy 1 $2,000 \ $1,000 -$1,000 \ -$2,000 2 -$2,000 \ -$1,000 $1,000 \ $2,000arrow_forwardWhich one of the following descriptions is WRONG, according to this Extensive Form shown below? 1.) There are 8 strategy profiles in this game. 2.) If Player 1 chooses strategy IA and Player 2 chooses strategy O, then player 1's payoff will be 4. 3.) If Player 1 chooses strategy OB and Player 2 chooses strategy I, then Player 2's payoff will be 2. 4.) Game over if Player 1 chooses O initially.arrow_forwardUsing the payoff matrix, suppose this game is infinitely repeated and that the interest rate is sufficiently “low.” Identify trigger strategies that permit players 1 and 2 to earn equilibrium payoffs of 140 and 180, respectively, in each periodarrow_forward
- What is the payoff to player 2 under the strategy profile (AK,D,FL) in this game?What is the payoff to player 3 under the strategy profile (BK,C,FM) in this game?arrow_forwardPlayers 1, 2, and 3 are playing a game in which the strategy of player i isdenoted yi and can be any nonnegative real number. The payoff function for player 1 is V1(y1,y2,y3) = y1 + y1y2 - (y1)2,for player 2 is V2(y1,y2,y3) = y2 + y1y2 - (y2)2,and for player 3 is V3(y1,y2,y3) = (10 - y1 - y2 - y3)y3.These payoff functions are hill shaped. Find a Nash equilibrium. (Hint: Thepayoff functions are symmetric for players 1 and 2.)arrow_forwardShow how the concept of focal points can lead us towards unique outcomes in games where multiple Nash equilibria exist.arrow_forward
- Ashley loves hanging out at the mall (payoff of 100) and hates hockey (payoff of -100). Joe loves hockey (payoff of 100) and hates hanging out at the mall (payoff of - 100). But both Ashley and Joe prefer to go out together (bonus payoff of 100 each in addition to the payoff from the activity they choose). If they go out separately, they get no bonus payoff. Complete the payoff matrix for Ashley and Joe. >>> If the answer is negative, include a minus sign. If the answer is positive, do not include a plus sign.arrow_forwardConsider the above extensive-form game. If player 1 chooses U, player 2 will choose____. If player 1 chooses D, player 2 will choose _____. Based on this, player 1 should choose to play ____.arrow_forwardWhich of the following is true for Firm 1? Peach strictly dominates Apple. Banana strictly dominates Apple. Banana strictly dominates Grapes. Grapes strictly dominates Apple. Which of the following is true for Firm 2? Blue strictly dominates Purple. Green strictly dominates Blue. Green strictly dominates Pink. Pink strictly dominates Blue. Which of the following is the IEDS (Iterated Elimination of Dominated Strategies) outcome of the game? (Apple, Pink) (Banana, Green) (Peach, Pink) (Banana, Pink) True or False: The outcome (Peach, Pink) is Pareto Efficient. True or False: (Banana, Purple) is a Nash Equilibrium.arrow_forward
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