1. In the game in the table below, each player (A and B) has three possible actions. These actions are labelled X, Y and Z.

	Player B
X	Y	Z
Player A	X	100,100	900,0	200,300
Y	500,900	700,300	100,700
Z	700,500	1100,1100	300,500

1a) Does player A have a dominant strategy? Does player B have a dominant strategy? Explain your answers, referring to a copy of the table.

1b) On the assumption that player A is rational, what should player B do? Why?

2). The companies in a duopoly face the payoff matrix shown below.

	Company B
X	Y
Company A	X	1, 1	3, 5
Y	5, 3	0, 0

2a) Is a Nash equilibrium always a dominant strategy? Explain why or why not using the game above to illustrate your argument.

2b) Show that there are two Nash equilibria if this game is played as a simultaneous move game. Make any notations on a copy of the table that you need and explain them.

2c) Assume now that Company B in the previous game can move first. Present the game in extensive form and fully analyse the outcome.

Answer rating: 100% (QA)

ANSWER 1a To determine if player A or player B has a dominant strategy we need to compare the payoffs for each action against all possible actions of ... View the full answer