Theo and Addy are deciding what toys to pick out at the toy store. Depending on what toys they pick, they can play different games together, but they can’t coordinate their choices. They can’t talk to one another at all until after that make their choice.Below is their payout matrix which shows their utility for each choice. All the bold figures are for Theo and all the non bold figures are for Addy. Addy StrategiesTheoStrategies Toy Gas PumpJump RopeToy food 2010 103 Ball 73 94 a) If Theo chooses Toy Food, what would be the possible outcomes for Addy? What would be best for Addy?b) If Addy chose a Toy Gas Pump, what are the possible outcomes for Theo? What would be best for Theo?c) Does Addy have a dominant strategy? If yes, what is her strategy? If not how can you tell? d) Does Theo have a dominant strategy? If yes, what is her strategy? If not how can you tell? e) Is there a Nash equilibrium? If yes, what would it be and why is it a Nash Equilibrium? if not explain your answer.

The best possible outcomes refer to the outcomes that provide better payoffs for the player after…

Answered: Theo and Addy are deciding what toys to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Theo and Addy are deciding what toys to pick out at the toy store. Depending on what toys they pick, they can play different games together, but they can’t coordinate their choices. They can’t talk to one another at all until after that make their choice.

Below is their payout matrix which shows their utility for each choice. All the bold figures are for Theo and all the non bold figures are for Addy.

		Addy Strategies
Theo Strategies		Toy Gas Pump	Jump Rope
Toy food	20 10	10 3
	Ball	7 3	9 4

a) If Theo chooses Toy Food, what would be the possible outcomes for Addy? What would be best for Addy?

b) If Addy chose a Toy Gas Pump, what are the possible outcomes for Theo? What would be best for Theo?

c) Does Addy have a dominant strategy? If yes, what is her strategy? If not how can you tell?

d) Does Theo have a dominant strategy? If yes, what is her strategy? If not how can you tell?

e) Is there a Nash equilibrium? If yes, what would it be and why is it a Nash Equilibrium? if not explain your answer.

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