MCQ question 1Two firms are deciding whether to invest in a new technology or not. The payoff matrix forthe two firms (Firm A, Firm B) is as follows:Firm BInvestDon't InvestFirmAInvest(i)(ii)0,03,1Don't invest(iii)(iii)1.32,2What is the Nash Equilibrium of this game?OA. Both firms invest.OB. Both firms don't invest.C. Firm A chooses invest and Firm Bchooses don't invest only.OD. Firm B chooses invest and Firm Achooses don't invest only.O E. Both C and D are correct

Analyzing the Scenario for Nash EquilibriumWe've been given the decision-making scenarios for two…

Answered: MCQ question 1 Two firms are deciding…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.1P

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Consider the following price game: Firm 1 Firm 2 High Low High 20, 20 12, 24 Low 24, 12 14, 14 Remark: In simultaneous move games (games with rows and columns) theconvention is to write the row player’s payoff first and the column player’spayoff second. (a) What is the Nash equilibrium of this game? Recall that for each playeryou should find the best response to each of the opponents’ strategies andunderline the associated payoff. Then look for a cell where both strategiesare best responses to each other. This is a Nash equilibrium. (b) Does either firm have a dominate strategy (a strategy that is always abest response)?
Solve for the Nash equilibrium (or equilibria) in each of the following games. (a) The following two-by-two game is a little harder to solve since firm 2’spreferred strategy depends of what firm 1 does. But firm 1 has a dominantstrategy so this game has one Nash equilibrium. Firm 2 Launch Don’tFirm 1 Launch 60, -10 100, 0 Don’t 80, 30 120, 0 What is the Nash equilibrium of this simultaneous-move game? (b) What would the outcome of this game be if instead firm 1 moved first and then, after seeing what firm 1 chose, firm 2 chose it strategy? In this case firm 1 doesn’t necessarily need to choose a best response, but firm 2 must choose a best response since it moves second.
Consider the following classic game, called Hawk and Dove. Player 2 Hawk Dove Hewk 0,0 4,1 Player 1 Dove 1,4 33 Select all pure strategy Nash equilibria and check the corresponding option if you think there exists a mixed strategy Nash equilibrium too. O There exists also a mixed strategy Nash equilibrium OHawk, Dove ODove, Hawk O Hawk, Hawk O Hawk, Hawk
Aedri Quick Lesson in Game Theory A Nash Equilibrium is an outcome in which neither player is better off by changing their strategy. 2.7 Is a Dominant Strategy equilibrium also a Nash equilibrium? a) Yes b) No esc The Ice Cream Guys $3.99 $4.99 + Chucky's Chunky CCT: $20,000 $3.99 ICG: $20,000 CCT: $60,000 ICG: $10,000 tab Treats CCT: $10,000 $4.99 ICG: $60,000 CCT: $40,000 ICG: $40,000 The table above is the payoff matrix for the annual profit of the only two ice-cream-truck firms operating in Beach City. They are deciding the price of an ice cream cone. %3D caps lo 2.8 What is Chucky's dominant strategy? a) $3.99 b) $4.99 c) Not enough information hift 2.9 What is the dominant strategy equilibrium in this situation? a) Both charge $3.99 b) Both charge $4.99 c) CCT charges $3.99 and ICG charges $4.99 d) CCT charges $4.99 and ICG charges $3.99 2.10 Suppose these two firms engaged in collusion (which, of course, totally doesn't happen because it is against the law). Which outcome would…
Consider the following game: Player 2 In Out Player 1 In -2,-2 2, 0 Out 0, 2 0, 0 (a) What is the Nash equilibrium of this game, or what are the Nash equilibriaof this game? (b) Does either firm have a dominate strategy (a strategy that is always abest response)? Which? (c) Suppose Player 1 could move before Player 2 and Player 2 could observe Player 1’s move. What do you think would happen?
2. Brad and Angelina have agreed to meet up for their first date. Neither of them can remember the exact location where they arranged to meet up and have forgotten their phones at home. Their payoff matrix can be described as follows: Brad The Hive Le Monde a) What is the Nash equilibrium in this game? Angelina The Hive 5; 5 0; 0 Le Monde 0; 0 5; 5
20) Given the payoff matrix in the figure, the Nash equilibrium outcome of this game is for: Ajinomoto Produce 30 Produce 40 million pounds million pounds Ajinomoto makes $180 million Ajinomoto makes $200 million Produce 30 million ADM makes $180 million ADM makes $150 million pounds Ajinomoto makes $150 million Ajinomoto makes $160 million Produce 40 million ADM makes $200 million ADM makes $160 million pounds O A. each firm to produce 30 million pounds. B. each firm to produce 40 million pounds. C. ADM to produce 30 million pounds and for Ajinomoto to produce 40 million pounds. D. ADM to produce 40 million pounds and for Ajinomoto to produce 30 million pounds. ADM
3. Nash Equilibria Consider the following (normal-form) game. Compute a Nash Equilibrium of this game. U C D L | M R 5,0 1,3 4,0 2,4 1,4 3,5 0,1 1,0 5,0
5. The following problem was first considered by John von Neumann and is a fundamentalresult game theory.A and B play the following game:A writes down either number 1 or number 2, and B must guess which one.If the number that A has written down is i and B has guessed correctly, B receives i units from A.If B makes a wrong guess, B pays 4/5 of a unit to A.First we consider the expected gain of player B.Suppose B guesses 1 with probability p and 2 with probability 1 −p.Let X1 denote B’s gain (or loss) in a game where A has written down 1.Let X2 denote B’s gain (or loss) in a game where A has written down 2.(a) Find the pmf of X1 and X2(b) Find B’s expected gain for these two cases, E[X1] and E[X2].(c) What value of p maximizes the minimum possible value of B’s expected gain?Now consider the expected loss of player ASuppose that A writes down 1 with probability q and 2 with probability 1 −q.Let Y1 be A’s loss (or gain) if B chooses number 1.Let Y2 be A’s loss (or gain) if B…
3. Consider the following payoff matrix for a complementary investment game: WCG a. Do Not Invest C. Invest b. What is the Nash equilibrium? Do Not Invest What is the maximin solution? 0 Does either firm have a dominant strategy? -100 BB 0 0 Invest 0 20 d. How do your answers change if BB loses 5 if it invests and WCG doesn't invest? 110 10
Consider the following simultaneous game: Player 1 U D Player 2 L 20,-10 -10, 20 R -10, 20 20,-10 Please indicate whether each of the following statements is true or false. Player 1 has a dominant strategy. This game has a Nash equilibrium. This game has a Nash equilibrium in pure strategies. Player 1's best response is D if player 2 plays R.
What is the Nash Equilibrium in a game?A. A situation where all players cooperate for maximum gainB. A situation where no player can improve their outcome by changing their strategy unilaterallyC. A situation where players always choose the same strategyD. A situation where players randomly select strategies

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