at one of the two
this is true even
tee and use the
the equilibrium
partment store.
ium outcome?
which has been
1nd proposes a
he Responder,
i the Proposer
he Responder
)tS, both play-
5 the players
33 or more,
3r knows Ra-
lhat strategy
as her cash
)out
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 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 11 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 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
Lesson overview
Chapter 5 Simultaneous Move Games with Pure Strategies
Lesson I.8 Simultaneous and Continuous Move Theory
Each Example Game Introduces some Game Theory
Example 1: Continuous Variables
Example 2: Risk in Nash Equilibrium
Example 3: Rationa
Lesson overview
Chapter 6 Combining Simultaneous and Sequential Moves
Lesson I.10 Sequential and Simultaneous Move Theory
Each Example Game Introduces some Game Theory
Example 1: Subgames
Example 2: No Order Advantage
Example 3: First Mover Advantage
Exam
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 6 Exercises SOLVED EXERCISES
S1. Second-mover 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 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 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
Lesson overview
Chapter 9 Uncertainty and Information
Lesson II.3 Cheap Talk and Adverse Selection Theory
Lesson II.4 Signaling and Screening Theory
Each Example Game Introduces some Game Theory
Example 1: Signaling and Screening
Example 2: Pooling
Exampl
Solutions to Chapter 19 Exercises SOLVED EXERCISES
S1. (a) The existence of buyer B2 means that buyer B1 will not be able to buy at any price below
200. If B1 tried to strike a deal at (for example) 190, B2 could offer to pay 191; if B2 bought at that pri
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
Lesson overview
Chapter 10 Strategic Moves
Lesson II.6 Strategic Move Theory
Each Example Game Introduces some Game Theory
Example 1: Unconditional Strategic Moves
Example 2: Credibility
Example 3: Implicit Promises
Example 4: Delegation
Example 5: Brinks
Solutions to Chapter 15 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 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
Lesson overview
Chapter 9 Uncertainty and Information
Lesson II.3 Cheap Talk and Adverse Selection Theory
Each Example Game Introduces some Game Theory
Example 1: Cheap Talk with Perfectly Aligned Interests
Example 2: Cheap Talk with Perfectly Conflicting
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
Lesson overview
Chapter 4 Simultaneous Move Games with Pure Strategies I:
Discrete Strategies
Lesson I.5 Simultaneous Move Theory
Each Example Game Introduces some Game Theory
Example 1: A Normal Form
Example 2: Nash Equilibrium
Example 3: Dominate Strate
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
Lesson overview
Chapter 4 Simultaneous Move Games with Pure Strategies
Lesson I.5 Simultaneous Move Theory
Lesson I.6 Simultaneous Move Problems
Each Example Game Introduces some Game Theory Problems
Example 1: Pure Coordination
Example 2: Assurance
Exam
Economics 4340: Answers to Homework 1
Problem 1 (U2 from Ch.3)
(a) Albus has three actions at one node, so he has 3 strategies, which are N , E, and S.
Minerva has two actions at each of her three nodes, so she has 23 = 8 strategies, which
are aaa, aab, a
Economics 4340/7340: Solutions to Midterm Exam 1
Spring 2014
Question 1
A. The players expected payos are 5 0.5 + 1 0.5 = 3 for Ann and 2 0.5 + 6 0.5 = 4
for Bob.
B. Substituting Nature with the payos (3, 4) and solving the game using backward induction
y
Economics 4340: Solutions to Final Exam
Spring 2014
Question 1
A. Potential buyers are willing to pay up to
0.6 $8, 000 + 0.4 $4, 000 = $6, 400
for a Civic of unknown type. Since $6, 400 > $6, 000, all cars will be traded at p = $6, 400.
B. In month 1 pot
Economics 4340/7340: Midterm Exam 1
Spring 2014
Answer each of the seven questions below. The weight given to each question appears in
parentheses following the question number. Show your work in order to receive partial credit.
You have 75 minutes to com
Economics 4340/7340 Game Theory
Homework 4, due Tuesday, April 21/2015
Problem 1 (15 points): Consider the following normal-form game:
Player 1
T
B
Player 2
L
M
1, 5 6, 3
5, 2 4, 4
R
3, 6
2, 1
A. Find the pure-strategy Nash equilibrium. Indicate the equil
Economics 4340/7340: Final
Spring 2014
Answer each of the seven questions below. The weight given to each question appears in
parentheses following the question number. Show your work in order to receive partial credit.
You have 120 minutes to complete th
Economics 4340/7340: Game Theory
Homework 1, due Tuesday, February 10/2015
Problem 1 (10 points): Exercise U2 from Chapter 3. There is a typo in U2(a). Mark the
unmarked Albus action as E.
Problem 2 (10 points): Exercise U3 from Chapter 3.
Problem 3 (20 p
Solutions to S3 and S4 from Chapter 9
Exercise S3
(a),(b) When f = 0.6, potential buyers are willing to pay up to
0.6 $18, 000 + 0.4 $8, 000 = $14, 000
for a 2006 Citrus of unknown type. Since $14, 000 > $12, 500, there will be a market for
oranges.
(c),(