Game Theory de Drew Fudenberg, Jean Tirole.Exercise 2.6** "gɔ, aiu ovyuvntiai ti"g VI CIUP pianig.jExercise 2.6** Consider the two-player game in figure 2.7. This is match-ing pennies with an outside option æ for player 1. Suppose that a e (0, 1).(a) Show that the set of mixed strategies for player 1 surviving iterateddeletion of strictly dominated strategies consists of two "edges of thestrategy simplex": the set of mixed strategies with support (H, a) and the setof mixed strategies with support (T, ¤).(b) Show directly (that is, without applying theorem 2.2) that the set ofrationalizable strategies for player 1 is also composed of these two edges.(Hint: Use a diagram similar to figure 2.3.)H TH1,-1-1,1T-1,11,-1aa,0a,0Figure 2.7

J. Von Neumann and Morgenstern two economists present the game of Matching Pennies in the game…

Answered: Exercise 2.6** Consider the two-player…

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Chapter15: Oligopoly And Strategic Behavior

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Game Theory de Drew Fudenberg, Jean Tirole.

Exercise 2.6**

Definition Definition Economic decision-making framework that analyzes how different players optimize their outcomes with given pay-offs corresponding to their available strategies. The assumptions of game theory are: The number of players or competitors are finite/limited; All participants are rational The rules of the game are known to every player; and Each participant has a finite set of actions. A common way in which game theory is presented as an ( m x n ) matrix in which m represents the strategies of row player and n represents the strategies of column player. There are several limitations of game theory: Many businesses have a large number of competitors, and selecting an optimal strategy in these circumstances is difficult; Real-life business operating environments are full of uncertainty and difficult to model as a game theory; and The assumption of rationality and utility maximization isn't always an accurate portrayal of human nature.

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