Instead of choosing Game A or Game B in the first stage, player 1 chooses either game B or directly which action to play in game A. Game L U (10,5) D (5,10) R (0,0) (0,0) Game B: L R U (6,6) (0,0) D (0,0) (0,0) (a) Write the game in extensive form. (b) Solve for all SPNES of the modified game. (c) Do all the SPNEs give intuitively reasonable predictions? Why or why not? (Hint: think about what the modification of the payoff to game A entail for player 2 in that game and how the predictions contrast with the case where the game is chosen first, then the action.)

Instead of choosing Game A or Game B in the first stage, player 1 chooses either game B or directly which action to play in game A. Game L U (10,5) D (5,10) R (0,0) (0,0) Game B: L R U (6,6) (0,0) D (0,0) (0,0) (a) Write the game in extensive form. (b) Solve for all SPNES of the modified game. (c) Do all the SPNEs give intuitively reasonable predictions? Why or why not? (Hint: think about what the modification of the payoff to game A entail for player 2 in that game and how the predictions contrast with the case where the game is chosen first, then the action.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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