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# Homework 7 Answers - Economics 111 Intermediate...

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Economics 111: Intermediate Microeconomics Spring 2006 Homework 6 Answer Key Professor: Pedro Dal Bó 1. Football or Movie: Players 1 and 2 were planned to go see either a football game or a movie but haven’t decided on one. Now it is time to go to one of the two places but unfortunately they are not together and have no way of communicating with each other. Each of them must decide separately. If both go to the movie theater or both go to the stadium they get an utility of 1 since they are together. Player 1 likes football and gets an additional utility of 1 from watching the game. Player 2 likes movies and get an additional utility of 1 from watching a movie. If they are alone they get a total utility of zero since they can only enjoy things when they are together. a. Write the payo ff s of the game in the matrix form. Player 2 Player 1 F M F 2, 1 0, 0 M 0, 0 1, 2 b. Find the pure strategy Nash equilibria. (F,F) and (M,M). c. Find the mixed strategies Nash equilibrium (the one with randomizations). For player 1 must be indi ff erent between F and M to be willing to randomize. For that, the probability β that 2 goes to F must be such that U 1 ( F ) = U 1 ( M ) .

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Homework 7 Answers - Economics 111 Intermediate...

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