Sub: Economics Topic: Game Theory
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
If there is a set of strategies with the property that no player can benefit by changing her strategywhile the other players keep their strategies unchanged, then that set of strategies and thecorresponding payoffs constitute the Nash Equilibrium. Under Nash equilibrium, no player has anincentive to deviate from the strategy chosen, since no player can choose a better strategy giventhe choices of the other player. Assuming that both agents are rational, the Nash equilibrium willbe at the point (s
We see that the payoffs for the both the players are (3, 3) when player1chooses strategy s
and player 2 chooses strategy s
(i)False. A strategy is dominant if, regardless of what any other players do, the strategy earns aplayer a larger payoff than any other. Hence, a strategy is dominant if it is always better than anyother strategy, for any profile of other players' actions. Depending on whether "better" is definedwith weak or strict inequalities, the strategy is termed strictly dominant or weakly dominant. If one strategy is dominant, then all others are dominated.(ii)True. This game is different from that in (a).