Ec101F09MT1V1Key

# Ec101F09MT1V1Key - c Copi Ec101 Fall 2009 Midterm 1 Answer...

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ˇ Copiˇ c, Ec101, Fall 2009, Midterm 1, 10/27/2009, Answer Key to version 1. Remark: The answer key below gives a pretty complete analysis of problems. 1. c. Pure-strategy Nash equilibria are clear, the mixed equilibrium is computed the same way as in the notes (find the probabilities that make the other player indifferent between his two actions). 2. d. Use backward induction: if 1 plays L, player 2 prefers to play D, and if 1 plays R, 2 plays u. Hence, player 1 prefers playing R. 3. b. If 1 played R, 2 would be better off playing u - so that 2’s threat is not credible. However, given 2’s strategy, 1 is better off playing L, so that this is a Nash eq, but not a subgame-perfect NE. 4. d. If a player optimizes in every situation he would only carry out credible threats. 5. b. This is clear (note that a. is not true - not every Nash equilibrium is a dominant- strategy equilibrium). 6. c. (Nasty, Nasty) and (Bomb, Bomb). Notice that Nasty weakly dominates the other two

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