Answers to Midterm 1 Practice Problems fall 06

Answers to Midterm 1 Practice Problems fall 06 - Answers to...

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Answers to Midterm 1 Practice Problems 1) b 2) d (When x>2 (L,H) is the unique NE. When x<2 (H,H) is the unique NE. When x=2, both (H,H) and (L,H) are pure strategy equilibria.) 3) d (Martin maximizes (100-P M +2/3 P E )( P M -10) with respect to P M . The best response function is P M =55+1/3 P E . Writing Emma's best response function and solving the two equations gives the result.) 4) e 5) c 6) c 7) c (Suppose Ivan charges High with probability q. Then Mindy gets 50q+25(1-q) if she plays High and 60q+20(1-q) if she plays Low. Equating q=1/3. Sp probability of Low is 2/3.) 8) a (Plug q=1/3 into 50q+25(1-q)) 9) d (Suppose Spouse 1 plays 1/2V+1/2I. Then Spouse 2 gets, 3 from playing V and 2 from playing I. So this is not an eqm.) 10) c (Apply Backward Induction.) 11) d (V is dominated by Y. After deleting V, E is dominated by D. After deleting E, Z is dominated by Y. After deleting Z, A and B are dominated by C. After deleting A and B, X is dominated by W. Now apply best-response-analysis on the remaining 2x2 game.) 12) c 13) a (If x=-1, the game has 2 pure strategy equilibria. In this case, by committing
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