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Chapter 10: Answers to Questions and Problems
1.
a.
Player 1’s dominant strategy is B. Player 2 does not have a dominant strategy.
b. Player 1’s secure strategy is B. Player 2’s secure strategy is E.
c.
(B, E).
2.
3.
a.
Player 1’s optimal strategy is B. Player 1 does not have a dominant strategy.
However, by putting herself in her rival’s shoes, Player 1 should anticipate that
Player 2 will choose D (since D is Player 2’s dominant strategy). Player 1’s best
response to D is B.
b. Player 1’s equilibrium payoff is 5.
4.
5.
a.
x
> 2.
b. x
< 2.
c.
x
< 2.
6.
7.
a.
Player 1 has two feasible strategies: A or B. Player 2 has four feasible strategies:
(1) W if A and Y if B; (2) X if A and Y if B; (3) W if A and Z if B; (4) X if A and
Z if B.
b. (60, 120) and (100, 150).
c.
(100, 150).
8.
9.
The normal form game looks like this:
Notice that there are two Nash equilibria: (Sale, Regular) and (Regular, Sale) with
profits of ($5, 3) and ($3, $5), respectively. Thus, there is not a clearcut pricing
strategy for either firm. One mechanism that might solve this problem is to advertise
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 Fall '08
 Crawford,L

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