Action ofPrisoner BConfessNot ConfessAction of Prisoner AConfess3 years eachA gets 8 yearB gets2 yearsNot ConfessA gets 2 yearsB gets 8 year10 years eachSuppose that there are two turns to the prisoner's dilemma.1. In the first turn, both prisoners are allowed to collude.2. In the second turn, both prisoners are not allowed to talk to each other, and must make a decisionsimultaneously.What is a) the outcome of the first turn? and b) the outcome of the second turn?a. Both confess What is a) the outcome of the first turn? and b) the outcome of the second turn?OOOa. Both confessb. Both don't confessa. Both confessb. Prisoner A or B will confess, and the other will not confessa. Both don't confessb. Both confessa. Both don't confessb. Prisoner A or B will confess, and the other will not confess

Game theory is concerned with the choice of an optimal strategy in conflict situations. Prisoners…

Action of Prisoner B Confess Not Confess Action of Prisoner A Confess a. Both confess 3 years each A gets 8 year B gets 2 years Not Confess What is a) the outcome of the first turn? and b) the outcome of the second turn? O A gets 2 years B gets 8 year 10 years each Suppose that there are two turns to the prisoner's dilemma. 1. In the first turn, both prisoners are allowed to collude. 2. In the second turn, both prisoners are not allowed to talk to each other, and must make a decision simultaneously.

Action of Prisoner B Confess Not Confess Action of Prisoner A Confess a. Both confess 3 years each A gets 8 year B gets 2 years Not Confess What is a) the outcome of the first turn? and b) the outcome of the second turn? O A gets 2 years B gets 8 year 10 years each Suppose that there are two turns to the prisoner's dilemma. 1. In the first turn, both prisoners are allowed to collude. 2. In the second turn, both prisoners are not allowed to talk to each other, and must make a decision simultaneously.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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3. The repeated prisoner's dilemma (PD) can be used as a simple framework to inves- tigate tacit collusion. Consider repeating the following stage game: A B A R, R 100, 24 B 24, 100 50, 50 where R is either 64 or 96. In each round, the players simultaneous choose an action (A or B). After both have made their choice the outcome is revealed, along with the payoffs for the round. Then a random number is drawn to determine whether the repeated game will continue for at least one more round. The probability the game will continue is c5, which is either ¹ or ³. 2 4 (a) Suppose the stage game were played just once (which is equivalent to c5 = 0). Find the Pareto efficient outcomes in the stage game. Does either player have a dominated strategy; if so, which? What is the one-shot Nash equilibrium pre- diction of the stage game? How does this prediction vary with the parameter R? (b) For the indefinitely repeated game, explain: i. Why both players choosing the strategy All B is a subgame…
6. Consider the following two-player game: 2 L M U 3,3 2,3 1 M 2,1 3,1 D R 0,2 3,3 0,3 3,0-5, -5 a. Find all pure NE. b. Find a (non-pure) MNE in which player 1 (the row player) plays a pure strategy. c. (Harder Question) Show that there cannot be a CE prescribing that strat- egy D of player 1 (the column player) is played with positive probability.
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Consider the infinite repeated two-player game where at each stage the play- ers play the non-zero-sum game given by A В A (5, 5) (0,7) В (7, 0) | (2, 2) (a) Consider the following strategies: SA: always play A. SB: always play B. • St: play A on the first stage, thereafter copy what the other player did in the preceding stage. Suppose that the total payoff involves a discount factor 8, and that both players are restricted to the pure strategies SA, SB, and sT. Determine the set of d for which (ST, ST) is a Nash equilibrium. (b) Use the one stage deviation principle to determine whether the pair (ST, ST) is a subgame perfect Nash equilibrium for some range of val- ues of 8.
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1. The technology of interaction for a contractual relationship is given by the matrix below. 2 H L 1 H 5,5 0,8 L 7,0 1,1 Suppose the players write an incomplete contract stating that they agree to play the jointly-efficient outcome (that which maximizes the joint payoff as found in last week's homework). Assume that the court can verify exactly the outcome of produc- tion. (a) Suppose that the court uses expectation damages. Can the jointly- efficient outcome be implemented? Briefly explain. (b) Suppose that the court uses reliance damages. Can the jointly-efficient outcome be implemented? Briefly explain. (c) Suppose that the court uses restitution. Can the jointly-efficient out- come be implemented? Briefly explain.