Tute12 - answer

Tute12 - answer - ECF1100: MICROECONOMICS Answers to...

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ECF1100: MICROECONOMICS Answers to tutorial 12 Chapter 11, Review Question 1 Each contestant in a military arms race faces a choice between maintaining the current level of weaponry or spending more to increase it. In this situation, each side seems to view military superiority as the best possible outcome. The worst possible outcome from each side’s point of view is military inferiority. Of the other two combinations – both sides maintaining their current spending, or both sides spending more – each nation would prefer the former, since both result in military parity. Assuming the contestants are the USA and the former USSR, these rankings give rise to the following payoff matrix. Each side’s dominant strategy is to spend more on weapons, yet the result when each side spends more is less attractive than if each side had held spending at current levels. USSR USA Spend more on weapons Spend the same on weapons Second best for each Third best for each Best for USSR Worst for USA Best for USA
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This note was uploaded on 08/30/2011 for the course ECON 101 taught by Professor Shen during the Three '11 term at Monash.

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Tute12 - answer - ECF1100: MICROECONOMICS Answers to...

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