Consider a game where there is a dominant strategy equilibrium. You would then argue that, in equilibrium the following statement applies Question options: Each player gets the highest utility he can possibly get. Total surplus is not necessarily maximized. Total surplus is maximized. At least one of the player gets the highest payoff he can reach.

Consider a game where there is a dominant strategy equilibrium. You would then argue that, in equilibrium the following statement applies Question options: Each player gets the highest utility he can possibly get. Total surplus is not necessarily maximized. Total surplus is maximized. At least one of the player gets the highest payoff he can reach.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.1P

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A Nash Equilibrium is the equilibrium of a game in which; Both players get the largest payoff amount Both players get the best payoff independent of what the other players choices are Both player, with the knowledge of what the other players possible moves are, do not have incentive to deviate from their strategy There is incomplete information of the game and each player makes the move that is best for them and their payoff outcome
Consider the following game in normal form. Not cooperate Cooperate Not cooperate 20,20 50,0 Cooperate 0,50 40,40 What is Nash equilibrium? Is it efficient? Why? What needs to be complied with so that the players would like to cooperate? What happens when one of the players does not cooperate? Why? Define trigger strategy. Calculate the discount factor (δ) that would make both players decide to cooperate.
You have just played rock, paper, scissors with your friend. You chose scissors and he chose paper, so you won. Is this a Nash equilibrium? Explain why or why not.
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True or false? If a game has a Nash equilibrium, that equilibrium will be the equilibrium that we expect to observe in the real world. False. People don’t always act in the way that a Nash equilibrium requires. People don’t always make the necessary calculations and they take into account the outcome of others. False. A Nash equilibrium is based on very strict assumptions that rarely hold in the real world. No real-world situation leads to a Nash equilibrium. True. As long as people are rational and have their own self-interest at heart, real-life games will result in the Nash equilibrium. True. Nash’s theory of equilibrium outcomes was derived from real-world interactions. The theory holds true for almost all real-world scenarios.
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