Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134739090
Author: Hubbard
Publisher: PEARSON
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Chapter 14, Problem 14.2.8PA
To determine
Whether the prisoner's dilemma is realist or unrealistic.
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Consider a game with two players who cannot communicate, and in which each player is asked a question. The players can answer the question honestly or lie. If both answer honestly, each receives $100. If one player answers honestly and the other lies, the liar receives $500 and the honest player gets nothing. If both lie, then each receives $50.
a) Describe the strategies and payoffs of this game
b) Construct the payoff matrix
c) Compare this game to the prisoners' dilemma. Are the two games similar or different? Briefly explain your answer.
Burger King has introduced new strategy by reducing the price of its Whopper by 75 percent if customers also purchased french fries and a soft drink. Nevertheless, the sales dropped within two weeks. Based on your knowledge on game theory, what do you think had happened?
The Edge magazine columnist, Jack Sparrow reported the recent findings of two academic political scientists. These scholars found out that voters are not happy with “negative campaigns” of politicians. However, the political scientists suggested it is pointless for candidates to stay positive. The damage from staying positive is heaviest when the opponent is attacking. Explain the dilemma.
Airlines practice price discrimination by charging leisure travelers and business travelers different prices. Why do you think by charging different prices; the airline companies will maximize their profits? Discuss briefly.
Briefly explain the differences between the equilibrium concepts we discussed in game theory. What do we need to assume about people’s decision making to find equilibria?
Chapter 14 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 14 - Prob. 14.1.1RQCh. 14 - Prob. 14.1.2RQCh. 14 - Prob. 14.1.3RQCh. 14 - Prob. 14.1.4PACh. 14 - Prob. 14.1.5PACh. 14 - Prob. 14.1.6PACh. 14 - Prob. 14.1.7PACh. 14 - Prob. 14.1.8PACh. 14 - Prob. 14.1.9PACh. 14 - Prob. 14.1.10PA
Ch. 14 - Prob. 14.2.1RQCh. 14 - Prob. 14.2.2RQCh. 14 - Prob. 14.2.3RQCh. 14 - Prob. 14.2.4RQCh. 14 - Prob. 14.2.5PACh. 14 - Prob. 14.2.6PACh. 14 - Prob. 14.2.7PACh. 14 - Prob. 14.2.8PACh. 14 - Prob. 14.2.9PACh. 14 - Prob. 14.2.10PACh. 14 - Prob. 14.2.11PACh. 14 - Prob. 14.2.12PACh. 14 - Prob. 14.2.13PACh. 14 - Prob. 14.2.14PACh. 14 - Prob. 14.2.15PACh. 14 - Prob. 14.2.16PACh. 14 - Prob. 14.2.17PACh. 14 - Prob. 14.2.18PACh. 14 - Prob. 14.3.1RQCh. 14 - Prob. 14.3.2RQCh. 14 - Prob. 14.3.3PACh. 14 - Prob. 14.3.4PACh. 14 - Prob. 14.3.5PACh. 14 - Prob. 14.3.6PACh. 14 - Prob. 14.4.1RQCh. 14 - Prob. 14.4.2RQCh. 14 - Prob. 14.4.3PACh. 14 - Prob. 14.4.4PACh. 14 - Prob. 14.4.5PACh. 14 - Prob. 14.4.6PACh. 14 - Prob. 14.4.7PACh. 14 - Prob. 14.4.8PACh. 14 - Prob. 14.2CTECh. 14 - Prob. 14.3CTE
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- In game theory, what is a subgame? What is a subgame-perfect Nash equilibrium? If possible, could you please provide an example? Thank you!arrow_forwardHi this is from a textbook. Thank you. Consider the following game in which Sally can play T or B and John chooses between L or R. Each player makes their choice simultaneously. If Sally chooses T and John chooses L, Sally gets a payoff of 5 and John has a payoff of 4. If Sally plays T and John R, Sally’s payoff is 8 and John gets 3. If Sally Chooses B and John L, the payoffs are 3 to Sally and 2 to John. Finally, if Sally chooses B and John R, the payoffs are 7 to Sally and 0 to John. Which statement is true? a) The Nash equilibrium is (B,R); this is a prisoners’ dilemma b) The Nash equilibrium is (T,R); this is a prisoners’ dilemma c) The Nash equilibrium is (T,R); this is not dominant strategy equilibrium d) The Nash equilibrium is (T,L); this is a dominant strategy equilibrium e) None of the abovearrow_forwardWhat is game theory? How can firms use game theory?arrow_forward
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