Consider the game matrix given here: a. If (T, L) is a dominant strategy equilibrium, then what inequalities must hold among a,…,h? b. If (T, L) is a Nash equilibrium, then which of the above inequalities must be satisfied?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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2. Consider the game matrix given here:

a. If (T, L) is a dominant strategy equilibrium, then what inequalities must hold among a,…,h?

b. If (T, L) is a Nash equilibrium, then which of the above inequalities must be satisfied?

Player 2
R
Player T
a,b
c,d
1
B
e,f
g.h
Transcribed Image Text:Player 2 R Player T a,b c,d 1 B e,f g.h
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Meaning of Decision Theory under Nash Equilibrium:

Under decision theory, it is a systematic procedure to identify the best and the most optimum possible decision among the various possible available alternatives. Under this, the degree of certainty ranges from completely certain to completely uncertain which involves a mid-range of those risk factors.

Under this, it is the basic formalism of decision theory in the payoff table, which maps common satisfaction under decisions to most certain factors of nature.

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