3. Anthony loves going to the opera while Becky loves watching football. The following diagram shows the payoffs for their choice of activity. For example, if Anthony chooses opera and Becky chooses football, then the activities are valued at £10 to Anthony and £20 to Becky, respectively. Assume that they can only choose one activity each. Based on this information, determine whether each of the following statements is true or false. Becky Opera Football Opera 80, 10 0,0 Football 10, 20 20,40 Anthony (a) There are two Nash equilibria: (Opera, Opera) and (Football, Football). (b) If Anthony announces that he will choose Opera and sticks to it, then (Opera, Opera) will be chosen. (c) If Anthony offers £20 to Becky for coming to the opera with him, then (Opera, Opera) may be chosen. (d) If Anthony offers £50 to Becky for coming to the opera with him, then (Opera, Opera) will definitely be chosen.

3. Anthony loves going to the opera while Becky loves watching football. The following diagram shows the payoffs for their choice of activity. For example, if Anthony chooses opera and Becky chooses football, then the activities are valued at £10 to Anthony and £20 to Becky, respectively. Assume that they can only choose one activity each. Based on this information, determine whether each of the following statements is true or false. Becky Opera Football Opera 80, 10 0,0 Football 10, 20 20,40 Anthony (a) There are two Nash equilibria: (Opera, Opera) and (Football, Football). (b) If Anthony announces that he will choose Opera and sticks to it, then (Opera, Opera) will be chosen. (c) If Anthony offers £20 to Becky for coming to the opera with him, then (Opera, Opera) may be chosen. (d) If Anthony offers £50 to Becky for coming to the opera with him, then (Opera, Opera) will definitely be chosen.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Subgame Perfect Equilibrium. Stephen J. Seagull must decide whether or not to start a new movie project. If he decides not to, he and Clod VandeCamp both get a utility of 10. If he decides to begin the project, both he and Clod must simultaneously decide who the director should be: George Spellbinder, or Ed Tree. If they disagree on the director, the movie isn't made, but both have wasted time, so they get only a utility of 0. If they agree on George Spellbinder, the movie will be a roaring success, and each gets a utility of 20. If they agree on Ed Tree, the movie will be terrible. and they will only get a utility of 5. (a). Draw the extensive form of this game. (b). Write down the normal form. (c). Find all Nash equilibria. (d). Apply the theory of iterated elimination of weakly dominated strategies and state its prediction. (e). Find all the subgame perfect equilibria.
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