EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 8, Problem 3RQ
To determine
Heuristics and biases.
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4. Consider the following variant of the Prisoner's Dilemma game: Player 1 is unsure
whether Player 2 is "nice" or "selfish", while Player 2 knows Player 1's preferences.
Further suppose that Player 1's preferences depend on whether Player 2 is nice
or selfish. Specifically, suppose that there is a probability p that Player 2 is "selfish",
in which case the game is given as follows.
Game with Selfish Player 2
Player1/Player 2
Cooperate (C)
Don't Cooperate (D)
Cooperate (C)
4, 4
0, 6
Don't Cooperate (D)
6, 0
2, 2
And Player 2 is "nice" with probability 1-p, in which case the following game
results.
Game with Nice Player 2
Player1/Player 2
Cooperate (C)
Don't Cooperate
(D)
2, 4
Cooperate (C)
6, 6
Don't Cooperate (D)
4, 0
0, 2
[Note that C = cooperate (with each other) and D = don't cooperate or defect).
a) Write the extensive form of this game. How many strategies does each
player have in this game?
b) For what values of p (if any) is it a Bayes-Nash equilibrium for Player 1 to
play D in…
Jin's Utility Function
Wealth
Utility
(Dollars)
60,000
4,000
61,000
4,110
62,000
4,209
63,000
4,288
Refer to Table 27-1. If Jin's current wealth is $61,000, then
O his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is not risk
averse.
O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is not risk
averse.
O his gain in utility from gaining $1,000 is greater than his loss in utility from losing $1,000. Jin is risk
averse.
his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Jin is risk averse.
Chapter 8 Solutions
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