EBK MICROECONOMICS
2nd Edition
ISBN: 9780134524931
Author: List
Publisher: YUZU
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Chapter 18, Problem 2P
To determine
Interpretation of an ultimatum game where the responder ends up negotiating for more or equal to half the share of money with the proposer.
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Two players play the Ultimatum Game, in which they are to split $20. A purely rational agent would only reject an offer of …
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-$20
-$19
-$1
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Evaluate the following statement. “We shouldn’t generalize from what people do in the ultimatum game because $10 is a trivial amount of money. When larger amounts of money are on the line, people will act differently.”
Two players play the Ultimatum Game, in which they are to split $20. A purely rational agent would only reject an offer of …
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- The prisoner illustrates that rational, self-interested individuals will natuarally avoid the Nash equilibrium, because it is worse for both of them, true or false and why ?arrow_forwardWe learned that we can use choice between a gamble over someone's best and worst outcomes and getting an outcome of interest (like getting pizza) for certain as a way to assign numeric values to utility (on a scale of 0 to 1). Using this method, if you are indifferent between the following: A gamble that has a 0.3 chance of your best possible outcome (and no lower chance), and a 0.7 chance of your worst possible outcome. Getting pizza for certain. it means that your utility for getting pizza is:arrow_forwardConsider the following Bayesian game. There are two players 1 and 2. Both players choose whether to play A or B. Two states are possible, L and R. In the former, players play a stag-hunt game, and in the latter, players play a matching pennies game. Suppose that Player 2 knows the state, while Player 1 thinks that the state is L with probability q and R with probability 1 ! q. Payo§s in each state respectively satisfy: Player 1 is the row player, and their payo§ is the first to appear in each entry. Player 2 is thecolumn player and their payo§ is the second to appear in each entry. (a) What is the set of possible strategies for the two players in this game? (b) Find all the pure strategy Bayes Nash equilibria for any value of q 2 (0, 1).arrow_forward
- Consider the following game. There are two payers, Player 1 and Player 2. Player 1 chooses a row (10, 20, or 30), and Player 2 chooses a column (10/20/30). Payoffs are in the cells of the table, with those on the left going to Player 1 and those on the right going to player 2. Suppose that Player 1 chooses his strategy (10, 20 or 30), first, and subsequently, and after observing Player 1’s choice, Player 2 chooses his own strategy (of 10, 20 or 30). Which of the following statements is true regarding this modified game? I. It is a simultaneous move game, because the timing of moves is irrelevant in classifying games.II. It is a sequential move game, because Player 2 observes Player 1’s choice before he chooses his own strategy.III. This modification gives Player 1 a ‘first mover advantage’. A) I and IIB) II and IIIC) I and IIID) I onlyE) II onlyarrow_forwardSophia is a contestant on a game show and has selected the prize that lies behind door number 3.The show’s host tells her that there is a 50% chance that there is a $15,000 diamond ring behindthe door and a 50% chance that there is a goat behind the door (which is worth nothing to Sophia,who is allergic to goats). Before the door is opened, someone in the audience shouts, “I will giveyou the option of selling me what is behind the door for $8,000 if you will pay me $4,500 for thisoption.” [Assume that the game show allows this offer.]a. If Sophia cares only about the expected dollar values of various outcomes, will she buythis option?b. Explain why Sophia’s degree of risk aversion might affect her willingness to buy thisoptionarrow_forwardTheo and Addy are deciding what toys to pick out at the toy store. Depending on what toys they pick, they can play different games together, but they can’t coordinate their choices. They can’t talk to one another at all until after that make their choice. Below is their payout matrix which shows their utility for each choice. All the bold figures are for Theo and all the non bold figures are for Addy. Addy Strategies Theo Strategies Toy Gas Pump Jump Rope Toy food 20 10 10 3 Ball 7 3 9 4 a) If Theo chooses Toy Food, what would be the possible outcomes for Addy? What would be best for Addy? b) If Addy chose a Toy Gas Pump, what are the possible outcomes for Theo? What would be best for Theo? c) Does Addy have a dominant strategy? If yes, what is her strategy? If not how can you tell? d) Does Theo have a dominant strategy? If yes, what is her strategy? If not how…arrow_forward
- 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 question that follows, n refers to the number of people rather than a fraction of the population. In the land of Pampa, living in the countryside gives you a fixed payoff of 100 (Pampa has lots of land), while living in a city gives you a payoff that first increases with the number of people living in the city (agglomeration), and then declines after the number of people goes above a certain threshold (congestion). Let us write this payoff as r = 20n - n²/2, where n is the number of city dwellers in that particular city. (a) Let N be the total population in Pampa. If only one city can exist in the entire country, trace out the set of equilibria (i.e., population allocations between countryside and city) as N varies from 0 to infinity. (b) Now suppose that new cities can come up, each yielding exactly the same payoff function as above. Focus on the equilibrium in each case with the maximum possible city dwellers, and explain how this equilibrium will move with the overall…arrow_forwardIn Figure 1, if in the status quo we are at point A, which point(s) would pass the Kaldor-Hicks compensation principle? In Figure 1, if in the status quo we are at point A, a movement to which point(s) would pass a unanimous vote? In Figure 1, if in the status quo we are at point A, describe what kind of side payment would be required to move to point D and cause neither Benny nor Gary to be made worse off?arrow_forward
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