Game format for the project

Game format for the project - Hope this helps. Al Qaeda is...

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Look to the game used in question 2 of the exam as a guide. Essentially, you must posit that there are two possible 'worlds' out there, and Al Qaeda is uncertain in which world it finds itself. If it finds itself in world 1 (with probability p), Spain will respond, in equilibrium, to the Madrid bombing by withdrawing from Iraq. If it finds itself in world 2 (with probability 1-p), Spain will respond to the bombing by redoubling its commitment in equilibrium (or some equivalently 'bad' scenario from Al Qaeda's perspective). Thus, the leaders of AQ must decide whether or not to bomb based upon their assessment of what world they are in. You must then solve for the threshold value of p such that AQ is indifferent between bombing and not bombing.
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Unformatted text preview: Hope this helps. Al Qaeda is considering bombing a subway station in Spain to hopefully force the Spanish to withdraw their troops in Iraq. The players are the Spanish Government and Al Qaeda. AQ is uncertain whether the Spanish Government will respond the bombings with withdrawing their troops from Iraq ( game 1 with probability p) or whether they would respond by heightening their support for the US in Iraq and against the fight on terror (game 2 with probability 1-p). . The leaders of AQ must evaluate these two games and choose which one is the true game and act according (bomb Spain if game 1 is true and not bomb Spain if game 2 is true). The threshold for p that...
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This note was uploaded on 11/19/2008 for the course ECON 101 taught by Professor Womer during the Fall '08 term at NYU.

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