Question: Consider a simultaneous move game between two players given by the following matrix: L R T 2 , 1 1 , 1 M 1 ,

Consider a simultaneous move game between two players given by the following matrix: L R T 2,11,1 M 1,01,1 B 0,01,2(a)(25 points) Find all the Nash equilibria in mixed strategies. 2. Consider the following policy game. The house of representatives (player 1) can propose a new federal minimum wage of x in [10,20]. After player 1 proposes x, the senate (player 2) observes the proposal and decides whether to accept or reject it. If proposal x is accepted then payoffs are u1(x)=5+x for player 1 and u2(x)=20x for player 2. If player 2 rejects the proposal then both players get a payoff of 7.25.(a)(10 points) Draw the game tree. How many subgames does it have? Give an example of a strategy of each player. (b)(20 points) Find a subgame perfect equilibrium of this game. Is it unique? (c)(10 points) Find a Nash equilibrium that is not subgame perfect. 3. Two team members can invest time and effort in creating a better working relationship. Each invests ei in [0,2], and if both invest more then both are better off, but it is costly for each team member to invest. In particular, the payoff function for player i is ui(ei , ei)=(1+ ei)ei e 2 i . The team leader, player 1, chooses her effort level e1 first. Player 2 observes e1 and then chooses his own effort level e2.(a)(25 points) Find the subgame perfect Nash equilibrium. (b)(10 points) Does the team leader enjoy a first mover advantage?

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