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pol everyday life exam1

# pol everyday life exam1 - 1 Find Nash equilibrium in a game...

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1. Find Nash equilibrium in a game in an extensive form and in a game in a strategic form [two simple games will be given]. - Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which no player has anything to gain by changing only his or her own strategy unilaterally. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium. Stated simply, Amy and Bill are in Nash equilibrium if Amy is making the best decision she can, taking into account Bill's decision, and Bill is making the best decision he can, taking into account Amy's decision. Likewise, many players are in Nash equilibrium if each one is making the best decision that they can, taking into account the decisions of the others. However, Nash equilibrium does not necessarily mean the best cumulative payoff for all the players involved; in many cases all the players might improve their payoffs if they could somehow agree on strategies different from the Nash equilibrium (eg. competing businessmen forming a cartel in order to increase their profits). Extensive form In the game pictured here, there are two players. Player 1 moves first and chooses either F or U . Player 2 sees Player 1' s move and then chooses A or R . Suppose that Player 1 chooses U and then Player 2 chooses A , then Player 1

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