PS3_001 - Econ 171 Spring 2010 Problem Set 3 Due Tuesday,...

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Unformatted text preview: Econ 171 Spring 2010 Problem Set 3 Due Tuesday, June 1 Important: hand in only the two-star problems. There are no one-star problems on this problem set. The notation a.b denotes problem number b from Chapter a in Watson. ** Problem 1 Consider a two-player Bayesian game where both players are not sure whether they are playing the game X or game Y , and they both think that the two games are equally likely. L M R T 1 ,. 2 1 , 1 ,. 3 B 2 , 2 , , 3 X L M R T 1 ,. 2 1 ,. 3 1 , B 2 , 2 , 3 , Y (a) This game has a unique Bayesian Nash equilibrium, which involves only pure strategies. What is it? (Hint: start by looking for Player 2s best response to each of Player 1s actions.) (b) Now consider a variant of this game in which Player 2 knows which game is being played (but Player 1 still does not). This game also has a unique Bayesian Nash equilibrium. What is it? (Hint: Player 2s strategy must specify what she chooses in the case that the game is X and in the case that it is Y .) (c) Compare Player 2s payoff in from the first two parts of this problem. What seems(c) Compare Player 2s payoff in from the first two parts of this problem....
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PS3_001 - Econ 171 Spring 2010 Problem Set 3 Due Tuesday,...

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