{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# midexam - Ecos3012 Strategic Behavior Midterm Exam Semester...

This preview shows pages 1–3. Sign up to view the full content.

Ecos3012 Strategic Behavior Midterm Exam, Semester 1, 2011 NOTE: This exam consists of 20 multiple choice questions and 2 problems. Each multiple choice question is worth 3 points and each problem is worth 20 points. Therefore, you can score a maximum of 100 points. Your score in this exam is worth 35% of the final grade. Duration: 2 hours including reading time. 1. Multiple Choice Questions Instructions. For each of the following, choose the best answer and mark it on the supplied answer sheets. Those questions marked with a “ ? ” may require a bit more computation than others. You might consider answering those later. Throughout, assume that in finite strategic form games, players do not use mixed strategies unless specified otherwise. 1. Suppose there are three states of the world and a typical action is given by a triple ( x, y, z ), denoting the monetary reward in the three states of the world. Consider two actions A = ( x, y, z ) and B = (ˆ x, ˆ y, z ). ( Both actions give the same reward in state 3). Now consider any other actions C = ( x, y, z * ) and D = (ˆ x, ˆ y, z * ) obtained from A and B by changing the reward in state 3. Suppose a Decision Maker (DM) is known to satisfy Expected Utility Hypothesis and it is known that she strictly prefers A to B. (a) DM must strictly prefer C to D. (b) DM may strictly prefer C to D but depends on the value of z * . (c) DM may prefer C to D but this depends on payoffs in the first two states (d) None of the above. Solution : This is straightforward. If the Expected utility hypothesis holds, then there must be a probability distribution ( p 1 , p 2 , p 3 , and a utility function u such that U ( A ) = p 1 u ( x ) + p 2 u ( y ) + p 3 u ( z ) (1) U ( B ) = p 1 u ( x 0 ) + p 2 u ( y 0 ) + p 3 u ( z ) (2) U ( C ) = p 1 u ( x ) + p 2 u ( y ) + p 3 u ( z * ) (3) U ( D ) = p 1 u ( x ) + p 2 u ( y ) + p 3 u ( z * ) (4) It is clear that U ( A ) > U ( B ) if and only if U ( C ) > U ( D ). Ecos3012 Strategic Behavior, Midterm Exam, 2011 1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2. Consider a bargaining problem h S, d 1 , d 2 i such that whenever a payoff vector ( u, v ) for the two players is feasible, then ( v, u ) is also feasible. Assume that Nash bargaining solution is applicable. (a) The Nash bargaining solution ( u * , v * ) must be such that u * = v * . (b) The Nash bargaining solution ( u * , v * ) cannot be such that u * = v * . (c) We must have log( u * ) = log( v * ). (d) None of the above. Solution : It is tempting to say u * = v * thinking that the bargaining problem is symmetric – however we do not know that it is symmetric. For that, in addition to the given information, we need to know that the outside options are equal, i.e. d * 1 = d * 2 .
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 10

midexam - Ecos3012 Strategic Behavior Midterm Exam Semester...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online