Consider the following game. Firm 1 can implement one of two actions, A or B. Firm 2 observes the action chosen by Firm 1 and then decides whether to fight it or not. (-10, 10) Firm 1 A B F2 F2 Fight Don't fight Fight Don't fight -(20, 15) (-10, 30) -(25, 15)
Consider the following game. Firm 1 can implement one of two actions, A or B. Firm 2 observes the action chosen by Firm 1 and then decides whether to fight it or not. (-10, 10) Firm 1 A B F2 F2 Fight Don't fight Fight Don't fight -(20, 15) (-10, 30) -(25, 15)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Consider the following game. Firm 1 can implement one of two actions, A or B. Firm 2
observes the action chosen by Firm 1 and then decides whether to fight it or not.
(-10, 10)
Firm 1
A
B
F2
• this strategy profile is
F2
Fight
Don't fight
Fight
Don't fight
[Select]
(20, 15)
(a) Consider the following strategy profile: Firm 1 chooses A; Firm 2 chooses don't fight if A,
and fight if B.
(-10, 30)
(25, 15)
• this strategy profile i✓ [Select ]
(b) Consider the following strategy profile: Firm 1 chooses A; Firm 2 chooses don't fight if A,
and don't fight if B.
• this strategy profile is [Select ]
(c) Consider the following strategy profile: Firm 1 chooses B; Firm 2 chooses fight if A and
fight if B.
not a Nash equilibrium
a Nash equilibrium, but not a subgame perfect Nash equilibrium
a subgame perfect Nash equilibrium
none of the above](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3463a177-7def-4976-965f-4502bb575f7c%2Fa50200dd-4733-40bf-a625-99b9b9bf9302%2Fir3lztn_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following game. Firm 1 can implement one of two actions, A or B. Firm 2
observes the action chosen by Firm 1 and then decides whether to fight it or not.
(-10, 10)
Firm 1
A
B
F2
• this strategy profile is
F2
Fight
Don't fight
Fight
Don't fight
[Select]
(20, 15)
(a) Consider the following strategy profile: Firm 1 chooses A; Firm 2 chooses don't fight if A,
and fight if B.
(-10, 30)
(25, 15)
• this strategy profile i✓ [Select ]
(b) Consider the following strategy profile: Firm 1 chooses A; Firm 2 chooses don't fight if A,
and don't fight if B.
• this strategy profile is [Select ]
(c) Consider the following strategy profile: Firm 1 chooses B; Firm 2 chooses fight if A and
fight if B.
not a Nash equilibrium
a Nash equilibrium, but not a subgame perfect Nash equilibrium
a subgame perfect Nash equilibrium
none of the above
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