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Case Western Reserve University

Department of Economics
ECON 329 - Game Theory
Spring 2018

Homework #1

Return in Class on Feb 6th

Name: .

1

describing the three essential elements of the game (2 points). A simple 3x3 game (6 points). 1 4. 0 C 4. (2 points). 3 Player 1 B 3. 1 a) Write down the normal form representation of this game. 1 2. c) Find all Nash equilibria of this game. b) Can this game be solved using Iterated elimination of dominated strategy (IEDS)? If so find the equilibrium using IEDS. 1 1. 3 -1. 1. 2 0. Total points ____ out of 20. 2 3. (2 points). Explain your solution. Explain your solution. Consider the following game: Player 2 A B C A 2. 2 .

A simple 3x3 game (6 points). 3 0. 3 D 3. 1 2. describing the three essential elements of the game (2 points). 4 4. 4 Player X M 4.2. Explain your solution. 0 a) Write down the normal form representation of this game. 7 0. Explain your solution. (2 points). c) Find all Nash equilibria of this game. b) Can this game be solved using Iterated elimination of dominated strategy (IEDS)? If so find the equilibrium using IEDS. 5 5. 2 1. 3 . Consider the following game: Player Y L C R T 8. (2 points).

0 x. c) Find all Nash equilibria of this game for any values of x. where your employee chooses either to “settle” or to “be tough in negotiation. 1 a) Write down the normal form representation of this game (2 points). b) Under what conditions “be tough” is a strictly dominant strategy for employee? (2 points). 0 1.” and you choose either to “hire an attorney” or to “give in. Give in or attorney (6 points). Manager (You) give in hire attorney settle 1. Suppose that you manage a firm and are engaged in a dispute with one of your employees. 1 Employee be tough 3.3. The process of dispute resolution is modeled by the following game. Explain your solution. 4 . x is a number that both you and the employee know.” In the matrix. (2 points).

Coke versus Pepsi (2 points). Which game best explains the advertising competition between Coke and Pepsi? (a) The battle of the sexes (b) Chicken (c) Prisoner’s dilemma (d) Matching pennies (e) Guessing game (“beauty contest”) 5 . Using the concept of the Game theory explain why Coke and Pepsi are so involved in advertising even though it is very costly and it would be better for both firms to abstain from advertisement.4.