MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 20, Problem 11QE
To determine

Check the statement whether it is true or false.

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True or false? If a game has a Nash equilibrium, that equilibrium will be the equilibrium that we expect to observe in the real world. False. People don’t always act in the way that a Nash equilibrium requires. People don’t always make the necessary calculations and they take into account the outcome of others. False. A Nash equilibrium is based on very strict assumptions that rarely hold in the real world. No real-world situation leads to a Nash equilibrium. True. As long as people are rational and have their own self-interest at heart, real-life games will result in the Nash equilibrium. True. Nash’s theory of equilibrium outcomes was derived from real-world interactions. The theory holds true for almost all real-world scenarios.
The following is a static game: Convert this game into dynamic form game. Find the Nash equilibrium and subgame perfect Nash equilibrium of this game. If you consider this game as dynamic then what kind of dynamic game is this.
You have just played rock, paper, scissors with your friend. You chose scissors and he chose paper, so you won. Is this a Nash equilibrium? Explain why or why not.
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