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Handout on Normal Form Games

# Handout on Normal Form Games - Game e which shows us that...

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Handout on Normal Form Games Econ 171 Fall 2008 Player 1 Player 2 C D C 2 , 2 0 , 3 D 3 , 0 1 , 1 a) Game a) is typically called . The solution concept we apply (today) to solve it is called . Games that we can solve this way, i.e. for which we can derive a unique prediction are called . When we use this concept, we rely on the assumption that the players are . X Y A 4 , 1 2 , 0 B 3 , 2 1 , 5 C 1 , 2 4 , 0 b) X Y A 3 , 4 0 , 2 B 4 , 2 1 , 1 C 0 , 0 2 , 3 c) We can apply this concept iteratively. Game b) is an example of a game that can be solved by . The strategy profile is the only strategy profile. When we use this concept, we rely upon the assumption of . Game c) shows us that X Y A 3 , 2 0 , 0 B 1 , 1 1 , 3 C 0 , 1 3 , 0 d) X Y A 3 , 2 0 , 0 B 2 , 1 2 , 3 C 0 , 1 3 , 0 e) Game d) shows us that a . This means that we should be careful to . The flip side of this is demonstrated by

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Unformatted text preview: Game e), which shows us that . Game f) Two ﬁrms produce the exact same good and choose output levels q i while facing cost function c i ( q i ). Demand determines a price depending upon total output: p ( q 1 + q 2 ). Suppose both ﬁrms are proﬁt maximizers. Formalize this as a normal form game. Players: Strategy Space: Preferences: Game f) shows us that normal form games . 1 X Y Z A 1 , 3 1 , 1 8 , B 4 , 3 1 , 4 3 , 2 C 3 , 2 , 1 5 , g) X Y Z A 6 , 3 5 , 1 , 2 B , 1 4 , 6 6 , C 2 , 1 3 , 5 2 , 8 h) 2...
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Handout on Normal Form Games - Game e which shows us that...

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