ECON13/PPE201Strategic Reasoning
ASYMMETRIC INFORMATION
Fall 2013
Main types of information asymmetry
I
Information asymmetry: one player in a game (one person
in a transaction) has more information than another.
Main types of information asymmetry
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Inf
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 5 Exercises SOLVED EXERCISES
S1. (a) Rs bestresponse 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) simultaneously: x = 10(10x x)1/2 10x
Solutions to Chapter 7 Exercises SOLVED EXERCISES
S1. False. A players equilibrium mixture is devised in order to keep her opponent indifferent
among all of her (the opponents) possible mixed strategies; thus, a players equilibrium mixture yields the oppo
Solutions to Chapter 6 Exercises SOLVED EXERCISES
S1. Secondmover advantage. In a sequential game of tennis, the second mover will be able to
respond best to the first movers chosen action. Put another way, the second mover will be able to exploit the in
Solutions to Chapter 8 Exercises SOLVED EXERCISES
S1. False. A players equilibrium mixture is devised in order to keep her opponent indifferent among
all of her (the opponents) possible mixed strategies; thus, a players equilibrium mixture yields the oppo
Solutions to Chapter 11 Exercises SOLVED EXERCISES
S1. False. The players are not assured that they will reach the cooperative outcome. Rollback
reasoning shows that the subgameperfect equilibrium of a finitely played repeated prisoners dilemma will enta
Solutions to Chapter 10 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 thr
Solutions to Chapter 9 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 12 Exercises SOLVED EXERCISES
S1. (a) (b) The number choosing X should decrease to move the population division between X and Because the line for action X is above the line for action Y when 100 people choose X,
Y away from the unsta
Solutions to Chapter 13 Exercises SOLVED EXERCISES
S1. (a) The payoff table for the two types of travelers is: High High Low 100, 100 70, 30 Low 30, 70 50, 50
(b)
The graph is:
(c)
There are three possible equilibria: a stable monomorphic equilibrium of a
Solutions to Chapter 16 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 14 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 15 Exercises SOLVED EXERCISES
S1. (a) In the purethreat 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 painter can compare her estimated cost to 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 anybody
Solutions to Chapter 18 Exercises SOLVED EXERCISES
S1. The father and daughter were implicitly negotiating about how much freedom from parental
control she would have. The fathers BATNA was low: breakdown of negotiation would lead to a tantrum or a scene
440
[CH. 11] THE PRISONERS' DILEMMA AND REPEATED GAMES
EXERCISES
that are measured in dollars and depend on the cards that he collects. If Row
chooses his Low card, 2, then Row gets $2; if he chooses his High card, 7,
then Column gets $7. If Column choose
Solutions to Chapter 4 Exercises SOLVED EXERCISES
S1. False. A dominant strategy yields you the highest payoff available to you against each of your
opponents strategies. Playing a dominant strategy does not guarantee that you end up with the highest of a
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[CH. 11] THE PRISONERS' DILEMMA AND REPEATED GAMES
EXERCISES
S3. A firm has two divisions, each of which has its own manager. Managers of
these divisions are paid according to their effort in promoting productivity in their divisions. The payment sche
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438
[CH. 11] THE PRISONERS' DILEMMA AND REPEATED GAMES
EXERCISES
S7. Recall the example from Exercise S8 of Chapter 5, where South Korea and
Japan compete in the market for production ofVLCCs. As in parts (a) and (b)
of that exercise, the cost of blJildin