5) The following set of (extensive form) games represent two firms who are attempting to form a cartel. The firms are called "A" and "B". The moves each can make are "Increase output" (↑ ) and "don't increase output" (X). The first game (shown below) represents their behavior in a single period where they act simultaneously, unaware of what their opponent is doing. Nash Equilibrium (NE) A: В: A A: 3 А: 1 A: 4 A: 2 B: 3 B: 4 B: 1 B: 2 a. Solve the game by the Rollback (backward induction) method by identifying the dominant strategies (the ones that the players choose), and circle the Nash Equilibrium (for the entire game) and write it above the starting node.

5) The following set of (extensive form) games represent two firms who are attempting to form a cartel. The firms are called "A" and "B". The moves each can make are "Increase output" (↑ ) and "don't increase output" (X). The first game (shown below) represents their behavior in a single period where they act simultaneously, unaware of what their opponent is doing. Nash Equilibrium (NE) A: В: A A: 3 А: 1 A: 4 A: 2 B: 3 B: 4 B: 1 B: 2 a. Solve the game by the Rollback (backward induction) method by identifying the dominant strategies (the ones that the players choose), and circle the Nash Equilibrium (for the entire game) and write it above the starting node.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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