final_2004

# final_2004 - Professor Rod Garratt Fall 2004 Final Exam...

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Professor Rod Garratt Fall 2004 Final Exam, Econ 210B You have 2 hours. Explain everything that needs explaining. Good Luck! 1. Consider the following two-player game, Γ . Each player can either work hard (h) or shirk (s). If both work hard they each get a payoff of 2. If both shirk they each get a payoff of 0. If one shirks and the other works hard, the person who works hard gets a payoff of –1 and the person who shirks gets a payoff of 0. The game Γ is preceded by another simultaneous game in which the two players announce whether they wish to “Play” or “Not Play” the game Γ . If they both announce “Play” then they play the game Γ . Otherwise, each gets a payoff of 1, i.e., strategy profiles (Play, Not Play), (Not Play, Play) and (Not Play, Not Play) give each player a payoff of 1. (a) Compute all the Nash equilibria of the subgame Γ . (4 points) (b) Is there a subgame-perfect equilibrium in which both players choose shirk with positive probability in the subgame Γ

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final_2004 - Professor Rod Garratt Fall 2004 Final Exam...

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