3. Consider a two-player, sequential-move game where each player can choose to play right or left. Player 1 moves first. Player 2 observes player 1's actual move and then decides to move right or left. If player 1 moves right, player 1 receives £20 and player 2 receives £45. If both move left, player 1 receives £15 and player 2 receives £30. If player 1 moves left and player 2 moves right, player 1 receives £40 and player 2 receives £40. a. Draw the above situation in the form of an extensive form game. b. Find the sub-game perfect Nash equilibrium of the extensive form game.

3. Consider a two-player, sequential-move game where each player can choose to play right or left. Player 1 moves first. Player 2 observes player 1's actual move and then decides to move right or left. If player 1 moves right, player 1 receives £20 and player 2 receives £45. If both move left, player 1 receives £15 and player 2 receives £30. If player 1 moves left and player 2 moves right, player 1 receives £40 and player 2 receives £40. a. Draw the above situation in the form of an extensive form game. b. Find the sub-game perfect Nash equilibrium of the extensive form game.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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