Solutions to Chapter 4 Exercises
SOLVED EXERCISES
S1.
(a)
For Rowena, Up strictly dominates Down, so Down may be eliminated. For Colin, Right
strictly dominates Left, so Left may be eliminated. These actions leave the pure-strategy Nash equilibrium
(Up, R

Solutions to Chapter 3 Exercises
SOLVED EXERCISES
S1.
(a)
There is one initial node (I) for Hansel making the first move; three decision nodes (D)
including the initial node, which represent the points where either Hansel or Gretel make a decision; and
si

Solutions to Chapter 8 Exercises
SOLVED EXERCISES
S1.
(a)
Your neighbor has a sure income of $100,000. In addition, under the insurance
contract, he will receive x when you have a good year and pay you $60,000 when you have a bad
year. The lowest value of

Solutions to Chapter 10 Exercises
SOLVED EXERCISES
S1.
False. The players are not assured that they will reach the cooperative outcome. Rollback
reasoning shows that the subgame-perfect equilibrium of a finitely played repeated prisoners dilemma
will enta

Solutions to Chapter 6 Exercises
SOLVED EXERCISES
S1.
Second-mover advantage. In a sequential game of tennis, the second mover can best respond to
the first movers chosen action. Put another way, the second mover can exploit the information she learns
fro

Solutions to Chapter 9 Exercises
SOLVED EXERCISES
S1.
The statement is true because promises, when successfully used as strategic moves, require that
you follow through on the promised action; you will not promise an arbitrarily large reward. You may
thre

Solutions to Chapter 13 Exercises
SOLVED EXERCISES
S1.
Some examples of incentive schemes that help induce more care on the part of policy holders:
1. The insurer can provide a multiyear contract or otherwise establishes an ongoing relationship in
which f

Solutions to Chapter 14 Exercises
SOLVED EXERCISES
S1.
(a)
In the pure-threat case, the unions expected payoff is 50(1 p) 100p = 50 150p. The
unions expected payoff goes to zero for p = 1/3 and is negative for p > 1/3. Thus the pure threat is too big
from

Solutions to Chapter 17 Exercises
SOLVED EXERCISES
S1.
The businessmans BATNA is probably quite low; holding onto the domain name may be worth
very little to him. Owning the domain name, which makes it easier for people to find the Alta Vista site, is
imp

Solutions to Chapter 16 Exercises
SOLVED EXERCISES
S1.
The painter can compare her estimated cost with a jobs true cost only when she does the job. But
the painter does a job only when she agrees (through the bidding process) to do it for less than anybod

Solutions to Chapter 15 Exercises
SOLVED EXERCISES
S1.
Under truthful voting, A should match Geology and Sociology in the first vote, with the winner
(Geology) to face Philosophy in the second round. Under strategic voting, A should match Philosophy and
S

Solutions to Chapter 12 Exercises
SOLVED EXERCISES
S1.
(a)
The payoff table for the two types of travelers follows :
High
Low
High
100, 100
30, 70
Low
70, 30
50, 50
(b)
The graph is shown below:
(c)
There are three possible equilibria: a stable monomorphi

Solutions to Chapter 11 Exercises
SOLVED EXERCISES
S1.
(a)
The number choosing X should decrease to move the population division between X and
Y away from the unstable center equilibrium.
(b)
Because the line for action X is above the line for action Y wh

Solutions to Chapter 5 Exercises
SOLVED EXERCISES
S1.
(a)
Rs best-response rule is given by y = 10x x. L spends $16 million, so x = 16. Then
Rs best response is y = 1016 16 = 10(4) 16 = 40 16 = 24, or $24 million.
(b)
Rs best response is y = 10x x, and Ls

Solutions to Chapter 2 Exercises
SOLVED EXERCISES
S1.
(a)
Assuming a sufficient supply of yogurt is available for all shoppers, each shopper is
simply making a decision. If some flavors of yogurt were in short supply, then it would be a game,
because shop