Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 16, Problem 9MC
To determine
Chicken game.
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Which of the following gambles is “unfair”?
a.
A game that promises to pay you $1 if a coin comes up head and cost you $1 if a coin comes up tail, with no entry fee.
b.
A game that promises to pay you $10 if a coin comes up head and cost you $1 if a coin comes up tail, with no entry fee.
c.
A game that promises to pay you $10 if a coin comes up head and cost you $1 if a coin comes up tail, with an entry fee of $4.50 for the right to play.
d.
All of the above.
a) How many players does this game have? What are the strategies of each player?
(b) What are the Nash equilibria of this game?
(c) What are the Pareto Efficient outcomes?
Sadaam Hussein is deciding where to hide his weapons of mass destruction(WMD), while the United Nations is deciding where to look for them. Thepayoff to Hussein from successfully hiding WMD is 5 and from havingthem found is 2. For the UN, the payoff to finding WMD is 9 and from notfinding them is 4. Hussein can hide them in facility X, Y, or Z. The UNinspection team has to decide which facilities to check. Because the inspectors are limited in terms of time and personnel, they cannot check allfacilities.a. Suppose the UN has two pure strategies: It can either inspect facilitiesX and Y (both of which are geographically close to each other) orinspect facility Z. Find a Nash equilibrium in mixed strategies.b. Suppose the UN can inspect any two facilities, so that it has three purestrategies. The UN can inspect X and Y, X and Z, or Y and Z. Find aNash equilibrium in mixed strategies.
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Managerial Economics: A Problem Solving Approach
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