Suppose that Abe and his brother Moe are lost in the desert and are in need of guidance to find an oasis. They can seek such guidance from either a burning bush or a golden calf. Abe has the following preferences: • If Moe chooses to talk to the golden calf, Abe prefers the outcome where he to chooses to talk to the golden calf than talk to the burning bush. • If Moe chooses to talk to the burning bush, Abe is indifferent between the outcome where he choose to talk to the burning bush and the outcome where he chooses to talk to the golden calf. • Regardless of his own decision, Abe prefers all outcomes where Moe talks to the burning bush than if he chose to talk to the golden calf. Moe has the following preferences: • If Abe chooses to talk to the golden calf, Moe prefers the outcome where he chooses to talk to the golden calf than talking to the burning bush. • If Abe chooses to talk to the burning bush, Moe prefers the outcome where he chooses to talk to the golden calf than talking to the burning bush. • Regardless of his own decision, Moe prefers all outcomes where Abe talks to the golden calf than if he chose to talk to the burning bush Use the above information to answer the following questions. 1. Organize and show Abe's preferred outcomes from the most valued to the least valued. 2. Organize and show Moe's preferred outcomes from the most valued to the least valued. 3. Illustrate the strategic game. 4. Does Abe have a dominant strategy? Does Abe have a weakly dominant strategy? 5. Does Moe have a dominant strategy? Does Moe have a weakly dominant strategy? 6. Identify all the standard Nash Equilibria, if any, that exist. 7. Do any strict Nash Equilibria exist? Explain.
Suppose that Abe and his brother Moe are lost in the desert and are in need of guidance to find an oasis. They can seek such guidance from either a burning bush or a golden calf. Abe has the following preferences: • If Moe chooses to talk to the golden calf, Abe prefers the outcome where he to chooses to talk to the golden calf than talk to the burning bush. • If Moe chooses to talk to the burning bush, Abe is indifferent between the outcome where he choose to talk to the burning bush and the outcome where he chooses to talk to the golden calf. • Regardless of his own decision, Abe prefers all outcomes where Moe talks to the burning bush than if he chose to talk to the golden calf. Moe has the following preferences: • If Abe chooses to talk to the golden calf, Moe prefers the outcome where he chooses to talk to the golden calf than talking to the burning bush. • If Abe chooses to talk to the burning bush, Moe prefers the outcome where he chooses to talk to the golden calf than talking to the burning bush. • Regardless of his own decision, Moe prefers all outcomes where Abe talks to the golden calf than if he chose to talk to the burning bush Use the above information to answer the following questions. 1. Organize and show Abe's preferred outcomes from the most valued to the least valued. 2. Organize and show Moe's preferred outcomes from the most valued to the least valued. 3. Illustrate the strategic game. 4. Does Abe have a dominant strategy? Does Abe have a weakly dominant strategy? 5. Does Moe have a dominant strategy? Does Moe have a weakly dominant strategy? 6. Identify all the standard Nash Equilibria, if any, that exist. 7. Do any strict Nash Equilibria exist? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that Abe and his brother Moe are lost in the desert and are in need of guidance to find an oasis.
They can seek such guidance from either a burning bush or a golden calf. Abe has the following preferences:
• If Moe chooses to talk to the golden calf, Abe prefers the outcome where he to chooses to talk to the
golden calf than talk to the burning bush.
• If Moe chooses to talk to the burning bush, Abe is indifferent between the outcome where he choose
to talk to the burning bush and the outcome where he chooses to talk to the golden calf.
• Regardless of his own decision, Abe prefers all outcomes where Moe talks to the burning bush than if
he chose to talk to the golden calf.
Moe has the following preferences:
• If Abe chooses to talk to the golden calf, Moe prefers the outcome where he chooses to talk to the
golden calf than talking to the burning bush.
• If Abe chooses to talk to the burning bush, Moe prefers the outcome where he chooses to talk to the
golden calf than talking to the burning bush.
• Regardless of his own decision, Moe prefers all outcomes where Abe talks to the golden calf than if he
chose to talk to the burning bush
Use the above information to answer the following questions.
1. Organize and show Abe's preferred outcomes from the most valued to the least valued.
2. Organize and show Moe's preferred outcomes from the most valued to the least valued.
3. Illustrate the strategic game.
4. Does Abe have a dominant strategy? Does Abe have a weakly dominant strategy?
5. Does Moe have a dominant strategy? Does Moe have a weakly dominant strategy?
6. Identify all the standard Nash Equilibria, if any, that exist.
7. Do any strict Nash Equilibria exist? Explain.
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