Question D2. An Aggressor country is threatening to attack another victim country. The victim country has allies who will come to their defence if they are attacked, however, the amount of troops the ally sends can be either small or large. The victim knows how many troops will be sent but the aggressor does not, the aggressor believes the probability the force is large is p. The game faced by the countries is depicted below. Victim "Large force"
Question D2. An Aggressor country is threatening to attack another victim country. The victim country has allies who will come to their defence if they are attacked, however, the amount of troops the ally sends can be either small or large. The victim knows how many troops will be sent but the aggressor does not, the aggressor believes the probability the force is large is p. The game faced by the countries is depicted below. Victim "Large force"
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Question D2. An Aggressor country is threatening to attack another victim country. The victim country
has allies who will come to their defence if they are attacked, however, the amount of troops the ally
sends can be either small or large. The victim knows how many troops will be sent but the aggressor
does not, the aggressor believes the probability the force is large is p. The game faced by the countries
is depicted below.
Victim "Large force"
Defend
Capitulate
Aggressor
Attack
(-50,-20)
(100,-50)
Don't Attack
(0,-10)
(0,0)
Victim "Small force"
Defend
Capitulate
Aggressor
Attack
(50,-80)
(100,-50)
Don't Attack
(0,-10)
(0,0)
a) Define what it means for a game to have incomplete information and explain how a game with
unknown payoffs can be thought of as such a game.
b) Write down a combined payoff matrix that includes strategies for the victim that are conditional
on their type and use this to work out the Bayesian-Nash Equilibria for this game.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8d9580c-4d0b-49bc-ba37-39696277403c%2F1464f42e-7031-47c7-b4db-1ed921604469%2F4kpz5pv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question D2. An Aggressor country is threatening to attack another victim country. The victim country
has allies who will come to their defence if they are attacked, however, the amount of troops the ally
sends can be either small or large. The victim knows how many troops will be sent but the aggressor
does not, the aggressor believes the probability the force is large is p. The game faced by the countries
is depicted below.
Victim "Large force"
Defend
Capitulate
Aggressor
Attack
(-50,-20)
(100,-50)
Don't Attack
(0,-10)
(0,0)
Victim "Small force"
Defend
Capitulate
Aggressor
Attack
(50,-80)
(100,-50)
Don't Attack
(0,-10)
(0,0)
a) Define what it means for a game to have incomplete information and explain how a game with
unknown payoffs can be thought of as such a game.
b) Write down a combined payoff matrix that includes strategies for the victim that are conditional
on their type and use this to work out the Bayesian-Nash Equilibria for this game.
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