This is a 2-part question that requires the answer before in order to answer the next one. Thank you for your time. 5) The following set of (extensive form) games represent two firms who areattempting to form a cartel. The firms are called "A" and "B". The moves eachcan make are "Increase output" (1) and “don't increase output" (X).The first game (shown below) represents their behavior in a single periodwhere they act simultaneously, unaware of what their opponent is doing.Nash Equilibrium(NE)A:B:A: 3A: 1A: 4A: 2B: 3B: 4B: 1B: 2a. Solve the game by the Rollback (backward induction) method byidentifying the dominant strategies (the ones that the players choose),and circle the Nash Equilibrium (for the entire game) and write itabove the starting node.XXAX The second game (shown below) is a repeated game. It represents their behavior in twosuccessive periods. Within each period they act simultaneously, but recall what has happenedpreviously. In the second period, In the second period, the players acquire the same payoffsthey did in the first, while retaining the payoffs received in the first. The figure below showsonly two of the four possible subgames for the second period.Nash Equilibrium(NE)A:Period 1B:APeriod 2Nash Equilibrium(NE)A:B:XXXXA: 4B: 1X↑XA: 6A: 4A: 7A: 5A: 4A: 2A:5A: 3B: 6B: 7B: 4B: 5B: 7B: 8B:5B: 6a.Solve the game by the Rollback method. Identify the dominant strategies and circlethe Nash Equilibrium for each subgame and write it above its starting node. Has theplayer's behavior changed significantly? Why or why not?A: 2B: 2Nash Equilibrium(NE)A:B:

Above question is an example of extensive game - There are two players : { A & B } Strategy set…

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" (1) 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.

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" (1) 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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