Question C1. Consider the following game played between two players, A and B. The players take it in turns to remove 1, 2 or 3 flags from a pile of 17 flags, with player A moving first. The player who takes the final flag, leaving none for the next player wins the game receiving a nominal payoff of 1, the other player receiving nothing.
Question C1. Consider the following game played between two players, A and B. The players take it in turns to remove 1, 2 or 3 flags from a pile of 17 flags, with player A moving first. The player who takes the final flag, leaving none for the next player wins the game receiving a nominal payoff of 1, the other player receiving nothing.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please try to answer in 30 minute
![Question C1. Consider the following game played between two players, A and B. The players take it in
turns to remove 1, 2 or 3 flags from a pile of 17 flags, with player A moving first. The player who takes
the final flag, leaving none for the next player wins the game receiving a nominal payoff of 1, the other
player receiving nothing.
a) Define the concept of sub-game perfect equilibrium and explain how this differs from the
Nash Equilibrium.
b) In the game outlined above, derive the sub-game perfect equilibrium.
c) Explain how the equilibrium outcome changes if the initial number of flags was changed from
17 to 16.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8d9580c-4d0b-49bc-ba37-39696277403c%2F61df8e8e-ea06-45be-875f-8abacd969451%2Fvcphzk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question C1. Consider the following game played between two players, A and B. The players take it in
turns to remove 1, 2 or 3 flags from a pile of 17 flags, with player A moving first. The player who takes
the final flag, leaving none for the next player wins the game receiving a nominal payoff of 1, the other
player receiving nothing.
a) Define the concept of sub-game perfect equilibrium and explain how this differs from the
Nash Equilibrium.
b) In the game outlined above, derive the sub-game perfect equilibrium.
c) Explain how the equilibrium outcome changes if the initial number of flags was changed from
17 to 16.
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