Econ398_HW3Solutions

Econ398_HW3Solutions - Econ 398 Homework 3 Sketchy...

• Notes
• 1

This preview shows page 1. Sign up to view the full content.

Econ 398 Homework 3 Sketchy Solutions 1. You can calculate the best response functions and then solve the two functions simultaneously to get a*=11, b*=2. Show that if each person adds one dollar to their own contribution, each person’s utility level increases. 2. Calculating yields Px* = 19.73, while Py* = 18.93. Note that Yvonne’s lower cost allows her to charge less than Xavier in equilibrium, but she’ll make more money. (Calculate this.) 3. You can calculate the Cournot-Nash Equilibria, and you’ll get q1* = 50 and q2* = 30. I’ve said in the past that it makes no sense to add the utility payoffs of the two players together, but in class I added the profits of the two Cournot competitors together and maximized the summand jointly over q1 and q2.
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: In this special case, payoffs are in terms of money, and therefore “utility” can be transferred from one player to the other by passing dollars between them. In this case, it does make sense to add the payoffs together to find the efficient production level. You can do this to find the efficient level of production for these two firms. In this case, the efficient level of production is a unique point, rather than a set of points on the line. Why? 4. An outcome is rationalizable if the each of the strategies in the strategy profile that gave rise to the outcome is rationalizable. Note that each of Row’s strategies are a best response to some strategy of Column’s. What does that say about the rationalizability of Row’s strategies? What about Column?...
View Full Document

• Fall '07
• Emre
• Game Theory, Utility, best response, best response functions, efficient production level, utility level increases

{[ snackBarMessage ]}

What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern