SI 563 Homework 4 Oct 20, 2016

Chapter 15

Exercise 1: 3 Points

Consider the following extensive-form games. Solve the game by using backward induction.

a)

A single sequentially rational strategy profile: (AF, C)

b)

A single sequentially rational strategy profile: (BHJKN, CE)

c)

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SI 563 Homework 4 Oct 20, 2016

3
X Y
2

A (2,1) (0,0)
B (2,6) (5,5)
C (3,1) (3,1)

A single sequentially rational strategy profile: (I, C, X)

Exercise 2: 3 Points

Compute the Nash equilibria and subgame perfect equilibria for the following games. Do so
by writing the normal-form matrices for each game and its subgames. Which Nash equilibria
are not subgame perfect?
a)

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SI 563 Homework 4 Oct 20, 2016

2
AC AD BC BD
1

WX (3,0) (3,0) (4,6) (4,6)

WY (8,5) (8,5) (2,1) (2,1)
ZX (6,4) (3,2) (6,4) (3,2)
ZY (6,4) (3,2) (6,4) (3,2)
The Nash Equilibrium are (WX, BD), (WY, AC), (WY, AD), (ZX, BC) and (ZY, BC)
2
A B
1

X (3,0) (4,6)
Y (8,5) (2,1)
The Nash Equilibrium are (X, B) and (Y, A)
2
C D
1

(6,4) (3,2)
The Nash Equilibria is (, C)
Only the restriction of (ZX, BC) and (WY, AC) can create NE in every subgame so only (ZX, BC) and
(WY, AC) are subgame perfect and (WX, BD), (WY, AD), (ZY, BC) are not subgame perfect.

b)

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SI 563 Homework 4 Oct 20, 2016

2
AC AD BC BD
1

UE (2,3) (2,3) (5,4) (5,4)

UF (2,3) (2,3) (5,4) (5,4)
DE (6,2) (0,2) (6,2) (0,2)
DF (2,6) (0,2) (2,6) (0,2)
The Nash Equilibrium are (UE, BD), (UF, BD), (DE, AC) and (DE, BC)
2
A B
1

(2,3) (5,4)
The Nash Equilibria is (, B)
2
1

E (6,2)
F (2,6)
The Nash Equilibria is (E, )
2
C D
1

E (6,2) (0,2)
F (2,6) (0,2)
The Nash Equilibrium are (E, C) and (E, D)
Only the restriction of (UE, BD) and (DE, BC) can create NE in every subgame so only (UE, BD) and
(DE, BC) are subgame perfect and (UF, BD), (DE, AC) are not subgame perfect.

Exercise 3: 2 Points

Consider the following games:

a) Solve the game by backward induction and report the strategy profile that results.
b) How many proper subgames does this game have?
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SI 563 Homework 4 Oct 20, 2016

a) A single sequentially rational strategy profile: (AHILN, CE)

b) There are 6 proper subgames in this game.

Exercise 11: 2 Points

Consider the following game.

a) How many proper subgames does this game have?

b) Solve the game by backward induction and report the strategy profile that results.

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SI 563 Homework 4 Oct 20, 2016

a)
There are 6 proper subgames in this game.

b)

A single sequentially rational strategy profile: (BHJKM, DE), and the payoff is (6, 5)

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