EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Question
Chapter 17, Problem 8P
To determine
Equilibrium in a game where the “responder” becomes the first player in the ultimatum game.
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You could choose any position A (the first mover) or B (the second mover) in
the following three bargaining games. For each game (I, II, or III), explain which
player (A or B) you would pick in order to maximize your expected payoff?
1. Game I (one stage): A will make the first move and offer her partner a portion
of 6 dollars. If the offer is accepted, the bargain is complete and each player gets an
amount determined by the offer. If the offer is declined, each player gets nothing.
2. Game II (two stages): A will make the first move and offer her partner
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player gets an amount determined by the offer. If the offer is declined, the 12 shrinks
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accepts and the division is made according to the terms of the offer. If player A
declines the offer, each player gets nothing.
3. Game III (three stages): A will make the first move…
please only do: if you can teach explain each part
Suppose Justine and Sarah are playing the ultimatum game. Justine is the proposer, has $140 to allocate, and Sarah can accept or reject the offer. Based on repeated experiments of the ultimatum game, what combination of payouts to Justine and Sarah is most likely to occur?.
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- Type out the correct answer ASAP with proper explanation of it In the Ultimatum Game, player 1 is given some money (e.g. $10; this is public knowledge), and may give some or all of this to player 2. In turn, player 2 may accept player 1’s offer, in which case the game is over; or player 2 may reject player 1’s offer, in which case neither player gets any money, and the game is over. a. If you are player 2 and strictly rational, explain why you would accept any positive offer from player 1. b. In reality, many players reject offers from player 1 that are significantly below 50%. Whyarrow_forwardIn 'the dictator' game, one player (the dictator) chooses how to divide a pot of $10 between herself and another player (the recipient). The recipient does not have an opportunity to reject the proposed distribution. As such, if the dictator only cares about how much money she makes, she should keep all $10 for herself and give the recipient nothing. However, when economists conduct experiments with the dictator game, they find that dictators often offer strictly positive amounts to the recipients. Are dictators behaving irrationally in these experiments? Whether you think they are or not, your response should try to provide an explanation for the behavior.arrow_forwardConsider the following game - one card is dealt to player 1 ( the sender) from a standard deck of playing cards. The card may either be red (heart or diamond) or black (spades or clubs). Player 1 observes her card, but player 2 (the receiver) does not - Player 1 decides to Play (P) or Not Play (N). If player 1 chooses not to play, then the game ends and the player receives -1 and player 2 receives 1. - If player 1 chooses to play, then player 2 observes this decision (but not the card) and chooses to Continue (C) or Quit (Q). If player 2 chooses Q, player 1 earns a payoff of 1 and player 2 a payoff of -1 regardless of player 1's card - If player 2 chooses continue, player 1 reveals her card. If the card is red, player 1 receives a payoff of 3 and player 2 a payoff of -3. If the card is black, player 1 receives a payoff of 2 and player 2 a payoff of -1 a. Draw the extensive form game b. Draw the Bayesian form gamearrow_forward
- Consider the following game: you and a partner on a school project are asked to evaluate the other, privately rating them either "1 (Good)" or "0 (Bad)". After all the ratings have been done, a bonus pot of $1000 is given to the person with the highest number of points. If there is a tie, the pool is split evenly. Both players only get utility from money. Mark all of the following true statements: A. The best response to your partner rating you as Good is to rate them as Good as well. Your answer B. There is no best response in this game. C. Your partner's best response to you rating them as Bad is to also rate you as C Bad. D. Your best response to any strategy of your partner is to play "Good".arrow_forwardAmir and Beatrice play the following game. Amir offers an amount of money z € [0, 1] to Beatrice. Beatrice can either accept or reject. If Beatrice accepts, then Amir receives 1 - z dollars and Beatrice receives a dollars. If Beatrice rejects, then both receive no money. As in the Ultimatum Game, Amir cares only about maximizing the amount of money he receives. Beatrice, on the other hand, detests Amir, and therefore cares about the amount of money that both receive: if Amir receives y dollars and Beatrice receives a dollars, then Beatrice's payoff is a-ay where a > 0. (a) Find all pure strategy Nash equilibria of the game in which the two players choose simultaneously (thus Beatrice accepts or rejects without seeing Amir's offer). Solution: The NE are the strategy profiles in which Beatrice rejects and Amir's offer a satisfies 2-a(1-x) ≤0, i.e. r ≤a/(1+a). (b) Find all subgame perfect equilibria of the sequential game in which Amir first makes the offer and Beatrice observes the offer…arrow_forwardConsider a modified version of the ultimatum game, with altruism. There is a pie of size 50 to be split between Proposer (P) and Responder (R). In the first stage, P offers a share 0 ≤ x ≤ 1 of the pie to R. In the second stage, R accepts or rejects P's offer. If R accepts, the pie is split according to the proposed division, with P receiving (1 - x) x 50 and R receiving x x 50. If R rejects, both players receive none of the pie. But players' payoffs are not equal to how much of the pie they receive. In particular, payoffs in the event of an accepted offer are: Up (1x) x 50+ bx × 50 UR = x x 50+b(1-x) × 50 (Payoffs in the event of a rejected offer are 0 for both players.) Here, the parameter b > 0 measures how altruistic players are, i.e. how much "happier" a player is when his opponent receives more pie. a) Suppose b = 0.5. How much pie does P receive in the subgame perfect Nash equilibrium of the game? (specify the total amount of pie, not the share). b) Suppose b=0.5. What is P's…arrow_forward
- Boris and Leo are playing an ultimatum bargaining game, with £1000 to share. Boris is the proposer. Suppose Leo has the following preferences: his utility in monetary terms is the amount of money he gets minus 40 percent of Boris's amount Which of the following statements is/are correct? a) If Leo's preferences change so that his utility in monetary terms were the amount of money he gets minus 100 percent of Boris's amount, his minimum acceptable offer would increase. b) The minimum offer Leo will accept is larger than £250. c) The description of Leo's preferences suggest that Leo is altruistic.arrow_forwardSuppose players A and B play a discrete ultimatum game where A proposes to split a $5 surplus and B responds by either accepting the offer or rejecting it. The offer can only be made in $1 increments. If the offer is accepted, the players' payoffs resemble the terms of the offer while if the offer is rejected, both players get zero. Also assume that players always use the strategy that all strictly positive offers are accepted, but an offer of $0 is rejected. A. What is the solution to the game in terms of player strategies and payoffs? Explain or demonstrate your answer. B. Suppose the ultimatum game is played twice if player B rejects A's initial offer. If so, then B is allowed to make a counter offer to split the $5, and if A rejects, both players get zero dollars at the end of the second round. What is the solution to this bargaining game in terms of player strategies and payoffs? Explain/demonstrate your answer. C. Suppose the ultimatum game is played twice as in (B) but now there…arrow_forwardUse the scenario below to answer the question. Chocolate raisin protein bars are Duc’s favorite dessert. A local bakery sells them for $1.00 each. Duc buys one and eats it at the bakery. Duc decides that he wants another one, but is not willing to pay full price. He knows the owner of the bakery and wants to negotiate. He offers to buy two more protein bars at $0.75 each. He plans to eat one at the store and anther one later. The bakery owner agrees to the deals. What is the total utility of Duc’s decision? 00 75 50 00arrow_forward
- In a sealed-bid, second-price auction with complete information, the winner is the bidder who submits the second-highest price, but pays the price submitted by the highest bidder. Do you agree? Explain.arrow_forwardSome collector has a painting that he no longer values. However, there are two buyers that would be happy to acquire it. Buyer 1 assigns a value of $900 to the painting, and buyer 2 of $1,000. Explain that this situation can be represented as a cooperative game with transferable utility. Obtain the set of players and write down the characteristic function (supposing that the grand coalition’s value is $1000). Find the Core and the Shapley value of the game.arrow_forwardFirm A is planning to rollout a new nationwide wireless telephone service next month. Its potential customers are either light users or regular users and these exist in equal proportion in the population. The firm must decide between offering a plan with 300 minutes, 600 minutes, or offering both plans. Each of these options costs the firm $10 to provide, and consumers’ willingness to pay is given below: (Image Attached) Each potential customer calculates the net payoff (benefit minus price) that he would get from each of the plans and buys the plan that gives the highest net payoff, so long as the payoff is nonnegative. Assume that if both plans give an equal, non-negative payoff the customer buys the 600 minute plan. a) What prices should the firm set if it wants to offer both plans, such that light users purchase the 300 minute plan and regular users purchase the 600 minute plan? b) How much higher is a regular user’s payoff under the scenario in part (a) above than if the firm…arrow_forward
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