Problem Set 6 Discussion Sections Economics 200 We will review Problems 1 - 4 in discussion sections beginning Wednesday, November 18. We will review Problems 5-6 in discussion sections beginning Wednesday, November 25. 1. A and B are playing a game where A can play either Top or Bottom and B can play either Left or Right. They will choose their strategies simultaneously. The payoff matrix in this game is Player B Left Right Player A Top 7 7 10 12 Bottom 12 10 11 11 where A's payoffs are shown below the diagonal and B’s payoffs are shown above the diagonal. (a) Does this game have a dominant strategy equilibrium? Defend your answer carefully. (b) How many Nash equilibria does this game have? Defend your answer carefully. 2. The Environmental Protection Agency (EPA) has established a regulation for Firm. Firm must decide whether or not to comply with this regulation; EPA must decide whether or not to inspect and thus find out whether or not Firm has complied.
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