aps8%20301%20f06 - Economics 301 PROBLEM SET 8 - ANSWERS...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 301 PROBLEM SET 8 - ANSWERS Wissink 1. False. The 1 st part of the statement is correct but the second is not. A dominant strategy will be a best response strategy. In fact, it’s a best response to each and every strategy of your rival. However, it is not true that all best response strategies are dominant strategies. Recall the price game in class. Chris’s best response to Roger choosing the high price was to choose the high price, while Chris’s best response to Roger choosing the low price was to choose the low price. Although a dominant strategy is a best response, a best response may not be a dominant strategy. It may be true that a player's best response to his opponent's first strategy is different from his best response to the opponent's second strategy. In this case, the best response is not a dominant strategy. 2. a. IRAN Rest of OPEC (ROO) low high low ROO = 40, Iran = 10 ROO = 30, Iran = 15 high ROO = 20, Iran = 3 ROO = 12, Iran = 5 b. Best responses for ROO: If Iran produces low, the rest of OPEC should produce low. If Iran produces high, the rest of OPEC should produce low. Therefore, "low" is a dominant strategy for the rest of OPEC. Best responses for Iran:
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

aps8%20301%20f06 - Economics 301 PROBLEM SET 8 - ANSWERS...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online