Econ398_HW5 - 4 Dixit and Skeath Chapter 7 Exercise 3 5...

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Econ 398 Homework 5 Due Friday, March 6, 2009 1) Dixit & Skeath, Chapter 6, problem 4 2) Dixit & Skeath, Chapter 6, problem 5 3) In the game depicted above, suppose that firm 2 operates both in Kalamazoo and in Toledo. Firm 1 is a potential entrant that can only enter one of these markets. If Firm 1 enters, Firm 2 has to decide whether to fight (F) or accommodate (A) Firm 1. Firm 1 also has to decide whether to fight or accommodate Firm 2. Payoffs are in order (Firm 1, Firm 2). a. How many strategies does Firm 1 have in the game above? b. List all the sub-game perfect equilibrium in pure strategies.
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Unformatted text preview: 4) Dixit and Skeath, Chapter 7, Exercise 3 5) Dixit and Skeath, Chapter 7, Exercise 6 6) Susan faces three possible outcomes yielding possible money payoffs, $a < $b < $c. She prefers gamble A to gamble B to gamble C to gamble D, where the table below shows the probability of each money prize. Gamble $a $b $c A .3 0 .7 B .1 .4 .5 C .3 .2 .5 D .45 0 .55 Are these preferences consistent with Susan having a utility function over the money payoffs with the expected utility property? If so, find such a utility function. If not, show why not....
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Econ398_HW5 - 4 Dixit and Skeath Chapter 7 Exercise 3 5...

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