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GT Homework 1 PDF

This document contains instructions for homework assignment 1 for the game theory course ECON 329 at Case Western Reserve University for the spring 2015 semester. It includes 4 questions analyzing different game theory concepts and examples, including: 1) Explaining why Coke and Pepsi continue costly advertising using game theory concepts. 2) Analyzing two 3x3 games - finding Nash equilibria and using iterated elimination of dominated strategies. 3) A game modeling dispute resolution between a manager and employee, finding conditions for strict dominance and Nash equilibria.

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152 views

GT Homework 1 PDF

This document contains instructions for homework assignment 1 for the game theory course ECON 329 at Case Western Reserve University for the spring 2015 semester. It includes 4 questions analyzing different game theory concepts and examples, including: 1) Explaining why Coke and Pepsi continue costly advertising using game theory concepts. 2) Analyzing two 3x3 games - finding Nash equilibria and using iterated elimination of dominated strategies. 3) A game modeling dispute resolution between a manager and employee, finding conditions for strict dominance and Nash equilibria.

Uploaded by

Anonymous TbKiHGZgr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Case Western Reserve University

Department of Economics
ECON 329 - Game Theory
Spring 2015

Homework #1
Lectures 1, 2, 3 & 4
Return in Class on Thursday Jan 29th
Name:

Total points ____ out of 20.


1. Coke versus Pepsi (2 points). 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.

2. A simple 3x3 game (6 points). Consider the following game:

Player 1

A
B
C

A
2, 2
3, 1
4, 1

Player 2
B
3, 1
4, 2
2, 3

C
1, 3
0, 0
-1, 1

a) Write down the normal form representation of this game, describing the three essential elements of the game
(2 points).

b) Can this game be solved using Iterated elimination of dominated strategy (IEDS)? If so find the equilibrium
using IEDS. Explain your solution. (2 points).

c) Find all Nash equilibria of this game. Explain your solution. (2 points).

3. A simple 3x3 game (6 points). Consider the following game:

Player X

T
M
D

Player Y
C
0, 4
1, 5
0, 1

L
8, 3
4, 2
3, 7

R
4, 4
5, 3
2, 0

a) Write down the normal form representation of this game, describing the three essential elements of the game
(2 points).

b) Can this game be solved using Iterated elimination of dominated strategy (IEDS)? If so find the equilibrium
using IEDS. Explain your solution. (2 points).

c) Find all Nash equilibria of this game. Explain your solution. (2 points).

4. Give in (6 points). Suppose that you manage a firm and are engaged in a dispute with one of your
employees. The process of dispute resolution is modeled by the following game, where your employee chooses
either to settle or to be tough in negotiation, and you choose either to hire an attorney or to give in. In
the matrix, x is a number that both you and the employee know.

Employee

Manager (You)
give in
hire attorney
1, 0
1, 1
3, 0
x, 1

settle
be tough

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).

c) Find all Nash equilibria of this game for any values of x. Explain your solution. (2 points).

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