Question: 9. In class we said that NE often gives sharper predictions than the iterative process of elimination of strictly dominated strategies. In this problem,

9. In class we said that NE often gives sharper predictions than

9. In class we said that NE often gives sharper predictions than the iterative process of elimination of strictly dominated strategies. In this problem, you will see that that's true only if some Nash equilibrium exists. Hence, there are games where eliminating strictly dominated strategies gives a smaller set of outcomes than those prescribed by the notion of Nash equilibrium. To see this, let's revisit the following game we saw in class: b1 b2 b3 b4 2, 3 0,4 g | 4,4 | 2,5 | 1,2 | 0,4 3,1 4, 2 2,3 1,4 1 3, 2| 4, 1 1 a3 1,3 3,1 5, 1 3,1 a. Show that there is no Nash equilibrium in this game; b. Apply the iterative process of strictly dominated strategies and write down the set of outcomes that survive; c. What is the set of rationalizable outcomes?

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Problem Overview We are given a normalform game with two players Player 1 strategies a1 a2 a3 a4 Player 2 strategies b1 b2 b3 b4 Payoffs are in the form u1 u2 where u1 is Player 1s payoff and u2 is Pl... View full answer

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