Consider the game depicted below, where p is the belief that Firm E has played Ini. a) Determine the belief p such that firm I (1) is indifferent between playing fight or accommodate, (ii) prefers playing fight and (iii) prefers playing accommodate. Write one sentence to explain the intuition. b) Show that there can be no Perfect Bayesian Equilibrium in which p > 2/3. c) Show that there can be no Perfect Bayesian Equilibrium in which p < 2/3. d) Show that there can be no Perfect Bayesian Equilibrium in which it is optimal for Firm E to play "Out". e) From the above it is obvious that if there exists a Perfect Bayesian Equilibrium, then it must have beliefs p = 2/3. Denote by q the probability with which firm I plays fight. Determine the players' (mixed) strategies and beliefs in the Perfect Bayesian Equilibrium. Firm F

Consider the game depicted below, where p is the belief that Firm E has played Ini. a) Determine the belief p such that firm I (1) is indifferent between playing fight or accommodate, (ii) prefers playing fight and (iii) prefers playing accommodate. Write one sentence to explain the intuition. b) Show that there can be no Perfect Bayesian Equilibrium in which p > 2/3. c) Show that there can be no Perfect Bayesian Equilibrium in which p < 2/3. d) Show that there can be no Perfect Bayesian Equilibrium in which it is optimal for Firm E to play "Out". e) From the above it is obvious that if there exists a Perfect Bayesian Equilibrium, then it must have beliefs p = 2/3. Denote by q the probability with which firm I plays fight. Determine the players' (mixed) strategies and beliefs in the Perfect Bayesian Equilibrium. Firm F

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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