PS1 - are given by the following payoff matrix Firm B H L H...

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Legal Studies 145 - Law and Economics I P ROBLEM S ET #1 1. What is a dominant strategy? Why is an equilibrium in dominant strategies stable? 2. Why might it be desirable to randomly choose one's actions in a repeated game? 3. Two computer firms are planning to market network systems for office information management. Each firm can develop either a fast, high-quality system (H), or a slower, low-quality system (L). Market research indicates that the resulting profits to each firm
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Unformatted text preview: are given by the following payoff matrix. Firm B H L --------------------------- H 30, 30 50, 35 Firm A L 40, 60 20, 20 ---------------------------- a. If both firms make their decisions at the same time, and follow maximin strategies, what will the outcome be? b. Suppose that firm A can commit first? Now what will the outcome be? What if firm B can commit first? You should assume that the parties pursue maximin strategies....
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