NAME:
Econ 171 (Grossman) — Spring 2010
Exam 2
May 13
You have 75 minutes to take this exam. Please answer all 4 questions, each of which is worth
15 points. Point subtotals are indicated. Show your work to obtain full credit.
1. Consider the extensiveform game shown in Figure 1.
R
L
1
r
1
2
,
1
l
1
1
,
2
2
r
2
l
2
0
,
3
2
r
1
,
4
l
2
,
2
1
Figure 1: The game from question 1.
(a) [5] List the strategies for each player.
(b) [5] Find the Nash Equlibria.
(c) [5] Apply backwards induction and state the resulting SPNE.
1
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
B
A
5
,
5
1
D
C
2
F
4
,
0
E
6
,
6
F
4
,
4
E
0
,
4
1
Figure 2: The game from question 2.
2. Consider the game shown in Figure 2.
(a) [5] Find all the purestrategy Nash equilibria of this game.
(b) [5] Which of these are subgame perfect?
(c) [5]
Challenge question
: There is a concept called
forward
induction that can be
used to argue that one of the SPNE is unreasonable.
We haven’t studied it in
class, but the name kind of gives you a hint as to how to apply it. Look at the
SPNE and try to come up with an argument for why one of them should be elim
inated.
Brieﬂy
explain your argument.
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '08
 Charness,G
 Game Theory, player, Subgame perfect equilibrium, Nash Equlibria

Click to edit the document details