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  • Exercise Game Theory

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    tobias
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    This document contains exercises on game theory concepts: 1) It presents a game with two players and two strategies for each player (High and Low). Game theory is applicable when there are more than two alternatives. 2) It defines the utility function for a player i as their payoff based on their own strategy Si and the strategy of the other player S-i. 3) In a tax scenario with three players, it shows that a player's preferred tax rate depends on whether the average payoff of all players is higher or lower than their own payoff without tax. If average payoff is lower, they prefer a lower tax, and vice versa.

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    Exercise game theory

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    This document contains exercises on game theory concepts: 1) It presents a game with two players and two strategies for each player (High and Low). Game theory is applicable when there are more than two alternatives. 2) It defines the utility function for a player i as their payoff based on their own strategy Si and the strategy of the other player S-i. 3) In a tax scenario with three players, it shows that a player's preferred tax rate depends on whether the average payoff of all players is higher or lower than their own payoff without tax. If average payoff is lower, they prefer a lower tax, and vice versa.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    15 views6 pages

    Exercise Game Theory

    Uploaded by

    tobias
    This document contains exercises on game theory concepts: 1) It presents a game with two players and two strategies for each player (High and Low). Game theory is applicable when there are more than two alternatives. 2) It defines the utility function for a player i as their payoff based on their own strategy Si and the strategy of the other player S-i. 3) In a tax scenario with three players, it shows that a player's preferred tax rate depends on whether the average payoff of all players is higher or lower than their own payoff without tax. If average payoff is lower, they prefer a lower tax, and vice versa.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 6

    Exercise 1 Game Theory

    2.1

    a) False
    b) True, if there are more than two alternatives
    c) False
    d) True

    2.2

    Si= { H , L }ui ( H , S−i )ui ( L , S−1)


    2.4
    U i ( T ) =wi ( 1−T ) +
    R (T )
    3
    U i ( T ) =wi ( 1−T ) +
    T ( w1 + w2 +w 3 )
    3 (
    U i ( T ) =wi −wi T +
    T ( w1 +w 2+ w3 )
    3 )
    U i ( T ) =wi +T ( ( w 1+ w2 +w 3 )
    3
    −wi )
    a) U i ( T ) =W 1 +T
    ( ( w1 +w 2+ w3 )
    3 ) (
    −w1 ->
    ( w 1+ w2 +w 3 )
    3 )
    −w 1 is negative in this case -> Preferred

    tax is T=0

    b) U i ( T ) =W 1 +T
    ( ( w1 +w 2+ w3 )
    3 ) (
    −w1 ->
    ( w 1+ w2 +w 3 )
    3 )
    −w 1 is positive in this case -> Preferred tax

    is higher
    3.1
    3.2

    3.4
    3.5

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