solution11a-spring11 - Econ 354K Game Theory Solutions to...

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Econ 354K Game Theory Solutions to Problem Set No. 11a 1. Loan (a) It’s because you do not have $1000 for the full year. You make monthly payments. (b) ] ) 1 ( 1 [ 100 ] ) 1 1 ( 1 1 [ 100 )] 1 ( ) 1 1 ( 1 1 1 1 1 [ 100 ] ) 1 1 ( ) 1 1 ( ) 1 1 ( [ 100 ) 1 1 ( 100 12 12 13 13 12 10 0 r r r r r r r r r r r r r n n nn n n = = = + = + = + + + = + + + = + ∑∑ (c) monthly interest rate: ] ) 1 ( 1 [ 100 12 r r + =1000 => r 2.92% (d) effective annual interest rate: (1+r) 12 -1 41.2% 2. Give a real world example (a) a finitely repeated game and (b) an infinitely repeated game. 3. The Game of Chicken: S – stubborn; C – chicken; x > 0 C S C 1,1 0,1+x S 1+x,0 -1,-1 One-shot Nash equilibria: Pure-strategy NE: (S,C) and (C,S) Mixed-strategy NE: p i =(1/(1+x), x/(1+x)), i=1,2 (for both players). It
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solution11a-spring11 - Econ 354K Game Theory Solutions to...

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