EconS491_Recitation5_Spring2011

Deriveallsubgameperfectnashequilibria

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ot confess instead. 7 Exercise 2­Chapter 9­Harrington Consider Revised OS/2 Game below: Do not develop OS/2 IBM Company 1 Company 2 Company 3 IBM 0 0 0 0 Develop OS/2 Company 1 Develop Do not develop Company 2 Company 2 D D DND Company 3 D 5 2 2 2 3 1 1 0 Company 3 D DND 3 1 0 1 DND D DND -2 -1 0 0 3 0 1 1 D DND -2 0 -1 0 -2 0 0 -1 DND -3 0 0 0 D=Develop DND=Do Not Develop 8 a. Derive all subgame perfect Nash equilibria. Consider the subgame between companies 2 and 3 associated with IBM having developed OS/2 and company 1 having developed an application. • The strategic form of the game is shown in the figure below: Company 3 Develop 2, 2 Do not develop 1, 0 0, 1 Company 2 Develop Do not develop 0, 0 Develop is a dominant strategy for each company, so there is a unique Nash equilibrium of (develop, develop) for this subgame. • Next, consider the subgame associated with IBM having developed OS/2 and company 1 having not developed an application. The strategic form of the game is shown below: Company 3 Develop 1, 1 Do not develop ‐1, 0 0, ‐1 Company 2 Dev...
View Full Document

Ask a homework question - tutors are online