To explain: how the assumption that players maximize payoffs in game theory is different from the conclusions derived in the chapters 2 and 3.
Answer to Problem 1RQ
Despite the relevance in the outcomes of game theory and utility analysis, both the concepts cannot be equated for the constraints and features involved in these concepts.
Explanation of Solution
In game theory, any player with the goal of earning high profits will maximize the payoffs. On the other hand, in demand analysis and utility analysis, consumers assume to maximize the utility through choosing appropriate choices.
However, both these concepts cannot be considered similar. There are various reasons for considering this statement to be true.
One reason is that while there are various intense contradictions among the players in the game theory, there is no such witness of contradictions in the demand and utility analysis.
Want to see more full solutions like this?
Chapter 5 Solutions
Intermediate Microeconomics and Its Application, 12th edition with CD-ROM
- Game theory is designed to study situations in which each agent's decisions are: A)interdependent. B)independent. C)constrained. D)uninformed.arrow_forwardA special situation that is taken from game theory where two individuals, even though they would benefit from working together, have incentives to act differently is calledarrow_forwardIn the following 3-player game, the payoffs represent the number of years in jail. The equilibrium is ________ Group of answer choices Eric and Ned denies. Eric and Tim confess, but Ned denies. Eric confesses, Ned and Tim deny. Eric and Time deny, but Ned confessesarrow_forward
- Real Options & Game Theory Is the following statement true or false (explain your answer): In any strategic-form game, if a player has a dominant strategy, then all of the other strategies of that player are dominated.arrow_forwardWithin a voluntary contribution game, the Nash equilibrium level of contribution is zero, but in experiments, it is often possible to sustain positive levels of contribution for a long period. How might we best explain this? A) Participants are altruistic, and so value the payoff which other participants receive, benefiting (indirectly) from making a contribution. B) Participants believe that if they make a contribution, then other participants will be more likely to make a contribution. C) Participants in experiments believe that they have to make contributions in order to receive any payoff from their participation. D) Participants have experience of working in situations in which cooperation can be sustained for mutual benefit and so have internalised a social norm of cooperationarrow_forwardConsider a game where player A moves first, choosing between Left and Right. Then, after observing player A’s choice, player B moves next choosing between Up and Down. Which of the following is true? This is a game where players A and B have the same number of strategies. Player A will get a higher payoff than player B as A moves first. This is game will only have one Nash equilibrium. This is a game of perfect information.arrow_forward
- Suppose two players play the prisoners' dilemma game a finite number of times, both players are rational, and the game is played with complete information, is a tit-for-tat strategy optimal in this case? Explain using your own words.arrow_forwardWhich of the following games have many Nash equilibria in pure strategies?(A) centipede games; (B) coordination games; (C) prisoner’s dilemma; (D) none of the above.arrow_forwardSee the extensive form game in the image attached (the payoffs of player 1 are written on top and the payoffs of player 2 are on the bottom). a) Write this game in normal form (a player's strategy is a complete contingent plan that tells them what to play at each of their information sets) (b) Find all the Nash equilibria of the normal form game from part (a)arrow_forward
- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningMicroeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage LearningManagerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc