Question: Question 1 (8 marks) Consider the following simultaneous game (A) in normal form: Player 2 Left| Right Player 1 Up 2, 2 0, 1 Down

Question 1 (8 marks) Consider the following simultaneous game (A) in normal form: Player 2 Left| Right Player 1 Up 2, 2 0, 1 Down |1, 0 1, 1 a) Calculate all the Nash equilibria of A. (4 marks) Now consider the following game (B): Player 2 Left Right Player 1 Up 3, 3 0, 1 Down | 1, 0 1, 1 b) Do games A and B have the same Nash equilibrium/equilibria? Why or why not? (4 marks) Question 2 (7 marks) Tanya is an owner of Invest Co. Her utility of wealth is given by U(W) = W where W is her wealth level. Tanya has been sponsored $M to invest in two potential investment projects (M is an amount of money and simply disappears if it is not invested in a project). Investment A pays $16 per dollar of investment or $0 with a 50% chance each. Investment B pays $9 per dollar of investment with probability 2/3 or $0 with probability of 1/3. Which proportion of M does Tanya want to invest in A? Explain your answer in reference to risk aversity discussed in class. (7 marks)

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