Consider the following centipede game consisting of two players, Pl and P2. The left/rightnumber each terminal node represents Pl's/P2's payoff, respectively. Then, answer thefollowing questions of [D5] and [M5]-|M8]:P1GP2P1G-(0, 2)D(2, 0)(1, 1)(4, 0)Suppose that P2 chooses G or D randomly. Then, what is the Pl's best responseof P1 for the P2's choice? And explain why.We assume that random choice is level-0 in the level-k theory. Then, answer theP2's choice in level-2.(a) D (b) G(c) random choice on (G, D) (d) G with probability 1/3Answer all the properties of Nash equilibrium and subgame perfect equilibriumwhich is derives from the backward induction.(a) All subgame perfect equilibria are Nash equilibria in any game.(b) All Nash equilibria are subgame perfect equilibria in any game.(c) There is always a unique Nash equilibrium in any game.(d) There exist pure-strategy Nash equilibria in any game.(e) The Nash equilibrium in prisoners' dilemma game is socially optimal.(f) Nash equilibria always predicts people's behavior in a real world.(g) Iterated elimination of strictly dominated actions always leads identicalresults which is independent of orders of elimination.(h) None

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Consider the following centipede game consisting of two players, Pl and P2. The left/right number each terminal node represents Pl's/P2's payoff, respectively. Then, answer the following questions of [D5] and [M5]-[M8]:

Consider the following centipede game consisting of two players, Pl and P2. The left/right number each terminal node represents Pl's/P2's payoff, respectively. Then, answer the following questions of [D5] and [M5]-[M8]:

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the following centipede game consisting of two players, Pl and P2. The left/right
number each terminal node represents Pl's/P2's payoff, respectively. Then, answer the
following questions of [D5] and [M5]-|M8]:
P1
G
P2
P1
G
-(0, 2)
D
(2, 0)
(1, 1)
(4, 0)
Suppose that P2 chooses G or D randomly. Then, what is the Pl's best response
of P1 for the P2's choice? And explain why.
We assume that random choice is level-0 in the level-k theory. Then, answer the
P2's choice in level-2.
(a) D (b) G
(c) random choice on (G, D) (d) G with probability 1/3
Answer all the properties of Nash equilibrium and subgame perfect equilibrium
which is derives from the backward induction.
(a) All subgame perfect equilibria are Nash equilibria in any game.
(b) All Nash equilibria are subgame perfect equilibria in any game.
(c) There is always a unique Nash equilibrium in any game.
(d) There exist pure-strategy Nash equilibria in any game.
(e) The Nash equilibrium in prisoners' dilemma game is socially optimal.
(f) Nash equilibria always predicts people's behavior in a real world.
(g) Iterated elimination of strictly dominated actions always leads identical
results which is independent of orders of elimination.
(h) None

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