(a) To find: Whether there is a dominant strategy.

Question

A linear programming computer package is needed. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars). Year 1 2 3 4 5 6 Payment 170 195 220 265 295 440 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securities (par value = $1,000). Funds not invested in these securities will be placed in savings. Security Current Price Rate (%) Years to Maturity 1 $1,055 6.750 3 2 $1,000 5.125 4 Assume that interest is paid annually. The plan will be submitted to the judge and, if approved,…

Answer 1

Question

Chapter 15, Problem 17P

To determine

(a)

To find:

Whether there is a dominant strategy.

To determine

(b)

To explain:

The dominant strategy to be followed and the way a strategy can be known.

To determine

(c)

To find:

Whether there is a Nash equilibrium and the way it is known.

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