week_10 - Department of Economics, University of...

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Page 1 of 3 Practice problems for week 10 Department of Economics, University of California, Davis Ecn 122 - Game Theory - Professor Giacomo Bonanno PRACTICE PROBLEMS for WEEK 10 Topic: incomplete information games VERY IMPORTANT : do not look at the answers until you have made a VERY serious effort to solve the problem. If you turn to the answers to get clues or help, you are wasting a chance to test how well you are prepared for the exams. I will not give you more practice problems later on. yxop 1. Albert and Bill play a game of chicken with incomplete information. Each player can choose “swerve” or “don’t swerve.” Choices are made simultaneously. If a player swerves then he is a nerd. If he does not, then he is a hero if the other player swerves but he is dead if the other player doesn’t. A player can be a “normal” type or a “reckless” type. A “normal” type gets a payoff of 100 from being a hero, 85 from being a nerd, and zero from being dead. A “reckless” type thinks being a hero is worth 100, being dead is worth 50, but being a nerd is worth zero! Albert knows for sure that Bill is normal, but Bill thinks that there is a 20 percent chance that
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week_10 - Department of Economics, University of...

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