Midterm Fall05

Midterm Fall05 - Economics 109 Midterm Examination Prof....

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Economics 109 Midterm Examination Prof. Watson, Fall 2005 You have one hour and twenty minutes to complete this examination. You may not use your notes or any books during the examination. Write your answers in the spaces provided on the answer sheet that has been distributed separately. You may use the scratch paper that has been distributed, but show your work (and write the key analytical steps) on your answer sheet and, when you have ±nished the examination, submit only your answer sheet. 1. Write your name in the designated space on the answer sheet. 2. Consider the following strategic setting. There are three players, numbered 1, 2, and 3. Player 1 has two cards, labelled King and Ace. At the beginning of the game, player 1 deals one of the cards to player 2 and the other card to player 3. That is, player 1 either gives the Ace to player 3 and the King to player 2 (call this the action A) or the King to player 3 and the Ace to player 2 (action K). Player 2 observes the card dealt to him; player 3 does not get to see the card dealt to her. Player 2 then must decide between switching cards with player 3 (S) or not (N). Player 3 observes whether player 2 made the switch, but does not see her card. Finally, player 3 responds to the question “Is your card the Ace” by saying either “yes” (Y) or “no” (N). If player 3 correctly states whether her card is the Ace, then she obtains a payo² of 1 and the other players get 0; otherwise, players 1 and 2 each gets a payo² of 1 and player 3 obtains 0.
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Midterm Fall05 - Economics 109 Midterm Examination Prof....

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