Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 18, Problem 8P
To determine
Equilibrium in a reverse trust game. Also, determine the difference in the process from the original trust game.
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Can you explain the "altruism and reciprocity" game theory, and provide an example? Is this the same as the "trust game?"
Consider the following dynamic game. There are two players (P1, P2). Player 2 tries to rob Player 1. If Player 1 pays $100, the game is over with Player 1 (victim) paying $100 to Player 2 (robber) (P1: -$100, P2: +$100). If Player 1 refuses to pay $100, then Player 2 has two choices: one is to hurt Player 1 (P1: -$5,000, P2: -$1,000) and the other is to walk away (P1: 0, P2: 0). Explain how to find an equilibrium in this game.
Roger and Rafael play a game with the following rules. Roger is given $250 to divide between himself and Rafael. Rafael does not get to choose but he can reject Roger’s offer if he does not like it. If Rafael rejects, both get nothing. If Rafael accepts, both get the split that Roger decided.
a. What is this game called?
b. Find all Nash equilibria for this game.
c. When this game is played in the real world, do the predictions in part 1b materialize? Why/why not?
d. Are all Nash equilibria in part 1b Pareto Optimal? Explain
Chapter 18 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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