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Problem Set 1 Solutions

# Problem Set 1 Solutions - /CMPS166a Fall2010...

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Problem Set 1 Solutions Econ 166a / CMPS 166a Fall 2010 Barry Sinervo and John Musacchio 1) Harrington 2.1 2) Harrington 2.2

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3) Harrington 2.5
4) Harrington 2.9

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Problem supp 1: In the sea otter kidnap game, write out the extensive form game for the male kidnap of pup, with ransom or no ransom paid by the female, harm/release unharmed by the male, retaliate/no retaliate by the female, and fill in the payoffs to male and female (consider the action of retaliate/no retaliate to be costly, but has a deterrent effect [so you have to fashion payoffs thinking towards the future]). Assign ordinal payoffs. You will get zero if you do not explain your rationale for the ordinal payoffs that you assign. Male payoffs top, female payoffs bottom. Explanation: The female cares most about getting her pup back safely. After that, she cares about not paying a ransom. Finally, she wants to maintain a reputation of retaliating whenever her pup is harmed, otherwise she would prefer not to take the risk of retaliating. These preferences give rise to the ordinal payoffs above. The male cares most about collecting a ransom. (If no ransom gets paid in the end, he’d rather not have kidnapped.) After that, he cares next about not being retaliated upon if the ransom is paid. If the ransom is not paid he cares more about maintaining his reputation as a fearsome kidnapper and thus wants to harm the pup. Finally, he prefers not to be retaliated upon. (Other payoffs are justifiable here).
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