Ec101F09MT1V1Key

Ec101F09MT1V1Key - Copi c, Ec101, Fall 2009, Midterm 1,...

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Unformatted text preview: Copi 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 2s threat is not credible. However, given 2s 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....
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Ec101F09MT1V1Key - Copi c, Ec101, Fall 2009, Midterm 1,...

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