Practice_midterm20-1

Practice_midterm20-1 - ECON 100C Practice Midterm #2...

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page 1 of 3 ECON 100C Practice Midterm #2 QUESTION 1 (20 points) Consider the following sequential game with two stages: A single seller offers a good to a single buyer. In the first stage of the game, the buyer can choose between three different strategies: Offer $20 for the good, offer $40, or offer $60. In the second stage, the seller can accept or refuse the offer. The seller values the good at $32. If she does not sell the good, her payoff is zero. The buyer values the good at $45, and his payoff is zero if the seller rejects his offer. a) (4 points) Draw the game tree. b) (6 points) Find the Subgame Perfect Nash equilibrium of the game. c) (10 points) Now, assume that the order of the moves is reversed. In the first stage, the seller can offer the good for $20, $40, or $60, and in the second stage, the buyer can accept or refuse the offer. Draw the new game tree and find the Subgame Perfect Nash equilibrium. QUESTION 2
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This note was uploaded on 10/21/2010 for the course ECON 1530 taught by Professor Ohly during the Spring '10 term at Dartmouth.

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Practice_midterm20-1 - ECON 100C Practice Midterm #2...

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