Two business partners have the opportunity to undertake a new project which will lead to a profit of £1000. First, though, they have to agree on how to split the profit. Consider the following (one-shot) bargaining game: the two business partners can make simultaneous demands. If the sum of their demands is no larger than £1000, then they can proceed with the project, obtain their demands and the rest is given to charity. If the sum of their demands is instead more than £1000, then the project cannot be undertaken, and they both get nothing. • What are the Nash equilibria of this game? • What are the strictly dominated strategies? • What are the weakly dominated strategies?
Two business partners have the opportunity to undertake a new project which will lead to a profit of £1000. First, though, they have to agree on how to split the profit. Consider the following (one-shot) bargaining game: the two business partners can make simultaneous demands. If the sum of their demands is no larger than £1000, then they can proceed with the project, obtain their demands and the rest is given to charity. If the sum of their demands is instead more than £1000, then the project cannot be undertaken, and they both get nothing. • What are the Nash equilibria of this game? • What are the strictly dominated strategies? • What are the weakly dominated strategies?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two business partners have the opportunity to undertake a new project which will lead to a profit of £1000. First, though, they have to agree on how to split the profit. Consider the following (one-shot) bargaining game: the two business partners can make simultaneous
• What are the Nash equilibria of this game?
• What are the strictly dominated strategies?
• What are the weakly dominated strategies?
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