Consider the following game in the build up to an election. The incumbent right-wing politician must first decide whether to occupy a right-wing or a left-wing stance on a particular policy. After the incumbent has made this decision, the left-wing challenger must then make the same choice. If both choose the same policy stance, the incumbent will stay in office. If both choose a different policy, the challenger will win the election and take office. The value of winning the election is 10, while the loser will get a value of 0. However, if a politician chooses a policy that is different from their own view, they get a value of -5. Where would the Subgame Perfect Nash Equilibrium be in this game? (Hint: Draw the game tree, and form the payoffs based on the information about the value of winning an election and choosing E

Consider the following game in the build up to an election. The incumbent right-wing politician must first decide whether to occupy a right-wing or a left-wing stance on a particular policy. After the incumbent has made this decision, the left-wing challenger must then make the same choice. If both choose the same policy stance, the incumbent will stay in office. If both choose a different policy, the challenger will win the election and take office. The value of winning the election is 10, while the loser will get a value of 0. However, if a politician chooses a policy that is different from their own view, they get a value of -5. Where would the Subgame Perfect Nash Equilibrium be in this game? (Hint: Draw the game tree, and form the payoffs based on the information about the value of winning an election and choosing E

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following game in the build up to an election.
The incumbent right-wing politician must first decide whether to occupy a right-wing or a left-wing stance on a particular policy.
After the incumbent has made this decision, the left-wing challenger must then make the same choice. If both choose the same
policy stance, the incumbent will stay in office. If both choose a different policy, the challenger will win the election and take
office.
The value of winning the election is 10, while the loser will get a value of 0. However, if a politician chooses a policy that is
different from their own view, they get a value of 5.
Where would the Subgame Perfect Nash Equilibrium be in this game?
(Hint: Draw the game tree, and form the payoffs based on the information about the value of winning an
election and choosing a policy that aligns with their own view)
a. Incumbent sets left-wing policy, challenger sets left-wing policy
b. Incumbent sets right-wing policy, challenger sets left-wing policy
c. Incumbent sets left-wing policy, challenger sets right-wing policy
d.
there is no subgame perfect Nash Equilibrium in this game
e Incumbent sets right-wing policy, challenger sets right-wing policy

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