PS2_001 - Econ 171 Spring 2010 Problem Set 2 Due May 6...

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Unformatted text preview: Econ 171 Spring 2010 Problem Set 2 Due May 6 Important: hand in only the two-star problems. The notation a.b denotes problem number b from Chapter a in Watson. * Problem 1 R , L 1 b a 2 Figure 1: An extensive game In the game in Figure 1, solve for the backwards-induction strategies and outcomes when the four missing payoffs are filled in with each possible permutation of the four numbers {- 2 ,- 1 , 1 , 2 } . * Problem 2 R 1 L 1 1 r 1 a, b l 1 2 r 2 e, f l 2 c, d 2 R 2 L 2 g, h 1 r 3 k, l l 3 i, j 2 Figure 2: Another extensive game (a) List the strategies available to each player in the game shown in Figure 2. (b) Construct payoffs ( a, b, c, d, e, f, g, h, i, j, k, l ) such that the terminal node r 3 , with payoffs ( k, l ), will be the unique backwards-induction outcome. (c) Now construct a different set of payoffs such that the unique backwards-induction outcome is r 3 , but the backwards-induction strategies are different than in the game you constructed in the previous part....
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This note was uploaded on 12/26/2011 for the course ECON 171 taught by Professor Charness,g during the Fall '08 term at UCSB.

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PS2_001 - Econ 171 Spring 2010 Problem Set 2 Due May 6...

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