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Sequential House of Cards game - Consider the House of Cards game you ana- lyzed in Problem Set 1. Now suppose Frank Underwood can choose first. Raymond Tusk will observe Underwood's choice and then makes his own choice.

Sequential House of Cards game - Consider the House of Cards game you ana- lyzed in Problem Set 1. Now suppose Frank Underwood can choose first. Raymond Tusk will observe Underwood's choice and then makes his own choice.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Note: House of Cards (Season One) is base information but then the next screenshot shows how the information changes so answer the question on that screenshot!

(1) House of Cards (Season One) ● Frank Underwood and Raymond Tusk need to negotiate the terms of a potential alliance. You are told the following: (a) Both of them need to decide whether or not to compromise. (b) To form an alliance, at least one of them has to compromise. (c) Both parties prefer forming the alliance under any circumstance to not forming an alliance, i.e., not forming an alliance is the worst outcome for both. (d) However, neither party likes to compromise (so, forming the alliance with- out compromising themselves is better than compromising themselves). (e) Having chosen to compromise, each of them will be better off if the other party also compromises.
Transcribed Image Text:(1) House of Cards (Season One) ● Frank Underwood and Raymond Tusk need to negotiate the terms of a potential alliance. You are told the following: (a) Both of them need to decide whether or not to compromise. (b) To form an alliance, at least one of them has to compromise. (c) Both parties prefer forming the alliance under any circumstance to not forming an alliance, i.e., not forming an alliance is the worst outcome for both. (d) However, neither party likes to compromise (so, forming the alliance with- out compromising themselves is better than compromising themselves). (e) Having chosen to compromise, each of them will be better off if the other party also compromises.
(5) Sequential House of Cards game - Consider the House of Cards game you ana- lyzed in Problem Set 1. Now suppose Frank Underwood can choose first. Raymond Tusk will observe Underwood's choice and then makes his own choice. (a) Represent this new game in its extensive form (draw the game tree) and in its strategic form. Find its pure strategy Nash equilibria and subgame perfect equilibria. (b) Now suppose that Frank Underwood can reconsider after Raymon Tusk makes his choice. That is, Frank Underwood can choose again, and the outcome is de- termined by his second choice rather than his first one together with the choice made by Tusk. Draw the game tree and find the subgame perfect equilibria (don't worry about NE). Does the ability to reconsider his choices benefit Un- derwood? (c) What can you learn from this exercise about negotiation?
Transcribed Image Text:(5) Sequential House of Cards game - Consider the House of Cards game you ana- lyzed in Problem Set 1. Now suppose Frank Underwood can choose first. Raymond Tusk will observe Underwood's choice and then makes his own choice. (a) Represent this new game in its extensive form (draw the game tree) and in its strategic form. Find its pure strategy Nash equilibria and subgame perfect equilibria. (b) Now suppose that Frank Underwood can reconsider after Raymon Tusk makes his choice. That is, Frank Underwood can choose again, and the outcome is de- termined by his second choice rather than his first one together with the choice made by Tusk. Draw the game tree and find the subgame perfect equilibria (don't worry about NE). Does the ability to reconsider his choices benefit Un- derwood? (c) What can you learn from this exercise about negotiation?
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