Ex. 5- - Agenda Setting An agenda-setting game is described as follows. The "issue space" (set of feasible poli- cies) is an interval X = [0,5]. An agenda setter (player 1) proposes an alternative x = X against the status quo q = 4. After player 1 proposes x, the legislator (player 2) ob- serves the proposal and selects between the proposal x and the status quo q. Player 1's most-preferred policy is 1, and for any final policy y = X his payoff is given by v1(y) = 10|y — 1|, - where |y1| denotes the absolute value of (y-1). Player 2's most preferred policy is 3, any final policy y Є X he payoff is given by and for v2(y) = 10|y3|. That is, each player prefers policies that are closer to his/her most-preferred policy. (1) Write down the strategic-form representation of the dynamic game. (2) Find a subgame perfect Nash equilibrium. Is it unique?
Ex. 5- - Agenda Setting An agenda-setting game is described as follows. The "issue space" (set of feasible poli- cies) is an interval X = [0,5]. An agenda setter (player 1) proposes an alternative x = X against the status quo q = 4. After player 1 proposes x, the legislator (player 2) ob- serves the proposal and selects between the proposal x and the status quo q. Player 1's most-preferred policy is 1, and for any final policy y = X his payoff is given by v1(y) = 10|y — 1|, - where |y1| denotes the absolute value of (y-1). Player 2's most preferred policy is 3, any final policy y Є X he payoff is given by and for v2(y) = 10|y3|. That is, each player prefers policies that are closer to his/her most-preferred policy. (1) Write down the strategic-form representation of the dynamic game. (2) Find a subgame perfect Nash equilibrium. Is it unique?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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