102B-PS_3-SOL--W2008

102B-PS_3-SOL--W2008 - Problem Set #3 Prof. D. Malueg...

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T B 8, 0, 10 5, 2, 6 10, 3, 5 2, 4, 4 2, 3, 4 3, 5, 3 8, 1, 10 7, 2, 3 T B LR AB Problem Set #3 Prof. D. Malueg Econ 102B SOLUTIONS 1. (a) For player 2, R strictly dominates L , so delete L . (b) In the reduced game, for player 3 A strictly dominates B , so delete B . (c) In the reduced game, for player 1 T strictly dominates B , so delete B . The unique strategy vector that survives IESDS is ( T,R,A ). 2. Pro±t functions for the two ±rms are π 1 ( x 1 ,x 2 )= 2 x 1 2 x 1 + x 2 V x 1 π 2 ( x 1 2 x 2 2 x 1 + x 2 V x 2 . The associated ±rst-order conditions identifying a best response for each ±rm are
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This note was uploaded on 07/06/2009 for the course ECON 102b taught by Professor Ozan during the Winter '08 term at UC Riverside.

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