(1) There are two traders (1 and 2) in a market who have to decide be- tween 'Aggressive' behaviour or 'Passive' behaviour. The payoffs that each player receives depend on the action of the other player and are summarised in the following normal form. 2 A P 1 A 1,1 3,2 P 2,4 4,3 (a) Suppose first that the traders decide on their action simultane- ously. Does any player have a dominant strategy in the game? What is the Nash equilibrium?

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(1) There are two traders (1 and 2) in a market who have to decide be-
tween 'Aggressive' behaviour or 'Passive' behaviour. The payoffs that
each player receives depend on the action of the other player and are
summarised in the following normal form.
2
A
P
1
A 1,1 3,2
P 2,4 4,3
(a) Suppose first that the traders decide on their action simultane-
ously. Does any player have a dominant strategy in the game?
What is the Nash equilibrium?
Transcribed Image Text:(1) There are two traders (1 and 2) in a market who have to decide be- tween 'Aggressive' behaviour or 'Passive' behaviour. The payoffs that each player receives depend on the action of the other player and are summarised in the following normal form. 2 A P 1 A 1,1 3,2 P 2,4 4,3 (a) Suppose first that the traders decide on their action simultane- ously. Does any player have a dominant strategy in the game? What is the Nash equilibrium?
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