PS2solutions

PS2solutions - Econ 171 Spring 2010 Problem Set 2 Solutions...

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Unformatted text preview: Econ 171 Spring 2010 Problem Set 2 Solutions to the two-star problems. In some cases I’ve provided more explanation than was asked of you. ** Problem 4 Consider the game shown in the figure, with the payoffs ( a, b, c, d, e, f, g, h, i, j, k, l ) = (2 , 2 , 1 , 3 , 3 , 1 , 3 , 1 , 4 , 6 , 2 , 7). (a) What is the backwards-induction strategy for each player? Solution: The backwards-induction strategy profile is ( L 1 L 2 , r 1 l 2 r 3 ). (b) What is the backwards-induction outcome? Solution: The backwards-induction outcome is ( L 1 , r 1 ) with payoffs (2 , 2). (c) Two strategies can arguably be considered “equivalent” if they designate the same behavior at all decision nodes that the player will reach with positive probability given her own previous choices as specified by both of the two strategies. For each player, state which (if any) strategies are equivalent to others. Solution: For Player 1, R 1 L 2 and R 1 R 2 are equivalent. For Player 2, r 1 r 2 l 3 and r 1 r 2 r 3 are equivalent and r 1 l 2 r 3 and r 1 l 2 l 3 are equivalent. ** Problem 5 Watson 15.2 Solution: (a) The Nash equilibria are { ( WY, AC ) , ( ZX, BC ) , ( WY, AD ) , ( ZY, BC ) , ( WX, BD ) } ....
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This note was uploaded on 12/26/2011 for the course ECON 100B taught by Professor Kilenthong during the Fall '08 term at UCSB.

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PS2solutions - Econ 171 Spring 2010 Problem Set 2 Solutions...

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