• When it comes to customs clearance of goods, customs officers and smugglers try to prevent the otherparty from predicting their respective intentions. Their respective profit metrics are as follows:• There is no general Nash equilibrium (pure strategv).• Question: What is the mixed strategy equilibrium?Customs OfficerInspectFree Pass(1-y)Cheat-50, 475, 0(x)SmugglerHonest0, -30,0(1-x)

Answered: Image /qna-images/answer/e9c495c4-6e93-4ab2-9cfc-2dc64ea30834.jpg

Answered: • When it comes to customs clearance of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6)Game Theory: The Prisoners’ Dilemma: Assume that the Wilson and Spalding athletic equipment companies are in a one-shot game for market share and profits, but that they have the option of choosing only one of two possible price strategies for basketballs: $20 or $80. Obviously if they choose different strategies, the firm with the lower price will win the entire market. The firms face the following payoff matrix (See Chap. 10). Wilson\ \Spalding Wilson $ 20 Price Wilson $ 80 Price Spalding $ 20 Price $ 400, $ 400 $ 1500, $ 0 Spalding $ 80 Price $ 0, $ 1500 $ 1000, $ 1000 What strategy will each firm choose? Why? Which strategy is dominant? Which strategy is preferred by each firm? What will be the outcome of the one-shot game? Where is the Nash equilibrium? Which outcome would be best for the two firms? What will happen if the game is repeated an infinite number of times?
Question 2 (Choices Involving Strategy): Suppose there are two competing Gyms in a local town. Each gym is individually owned and has three pricing levels to choose from: Low, Medium and High (PL,PM, and PH). Consider the table below as the outcomes for each combination of strategies (they are yearly profits in the thousands). Can you predict the outcome using ONLY iteratively dominated strategies? Why or why not? Find the Nash Equilibrium(a) using best responses. Is this the best outcome? Now, suppose that there was a sudden increase in the cost of equipment that meant the low price was no longer viable, and both choosing the medium price level meant only 50 (thousand) profit for each gym. Nothing else changes. What is the pure and mixed strategy Nash equilibrium of this new game? Gym 1 is on the left and Gym 2 is on the top. The first number inside every box is Gym 1's profit and the second (after the comma) is Gym 2's profit. (10 Marks) PL PMPH PL 125, 125 200, 75 375,50 PM 75, 250…
O Cell A O Cell C O Cell E O Cell I None of the above
Q:3 a,b and c
Two rival companies competing in the same market need to decide their plans for future expansion of their stores. The Table below shows the possible outcomes of their mutually interdependent actions (payoffs are profits in £m) Giga Company Titanic Conglomerate No Change Refurbishment of existing stores Large Expansion No Change 30, 40 25, 35 15, 24 Refurbishment of existing stores 35, 30 28, 32 18, 33 Large Expansion 12, 22 18, 20 20, 25 The Nash equilibrium: (A) does not exist. (B) occurs when both firms choose Refurbishment of existing stores. (C) occurs when both firms choose Large Expansion. (D) occurs when both firms choose No Change.
PART C D
Explain the meaning of a Nash Equilibrium. How does it differ from and equilibrium in dominant strategies?
Please help with #4- A and B
Consider the 2-player, zero-sum game "Rock, Paper, Scissors". Each player chooses one of 3 strategies: rock, paper, or scissors. Then, both players reveal their choices. The outcome is determined as follows. If both players choose the same strategy, neither player wins or loses anything. Otherwise: • "paper covers rock": if one player chooses paper and the other chooses rock, the player who chose paper wins and is paid 1 by the other player. "scissors cut paper": if one player chooses scissors and the other chooses paper, the player who chose scissors wins and is paid 1 by the other player. "rock breaks scissors": if one player chooses rock and the other player chooses scissors, the player who chose rock wins and is paid 1 by the other player. We can write the payoff matrix for this game as follows: rock paper scissors rock 0 -1 1 paper 1 0 scissors -1 1 -1 0 2. Suppose now we alter the game so that whenever Colin chooses "paper" the loser pays the winner 3 instead of 1: rock paper…
Q3

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