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HUL311Quizzes-2

The document is a quiz for the course HUL311: Applied Game Theory at IIT Delhi for Semester-II 2024-25, consisting of multiple-choice questions related to game theory concepts. It covers topics such as utility functions, Nash equilibrium, monopolies, and the method of iterated elimination of strictly dominated strategies. Each question has specific options for answers, requiring students to apply their understanding of game theory principles.

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Esna Mandal
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10 views3 pages

HUL311Quizzes-2

The document is a quiz for the course HUL311: Applied Game Theory at IIT Delhi for Semester-II 2024-25, consisting of multiple-choice questions related to game theory concepts. It covers topics such as utility functions, Nash equilibrium, monopolies, and the method of iterated elimination of strictly dominated strategies. Each question has specific options for answers, requiring students to apply their understanding of game theory principles.

Uploaded by

Esna Mandal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Quiz 1

HUL311: Applied Game Theory


Indian Institute of Technology Delhi
Semester-II: 2024–25
SET ACB
Name: Entry Number:
Select the most appropriate choice among the alternatives for the questions below

1. (3 points) There are two legislators in the Congress, and each of them represents a
constituency. Suppose the utility function of each legislator j is:

Nj (xj ) = b(xj ) − tj T (xj , x−j ) (1)

where xj is the amount of public spending on public projects in district j, tj is


the share of aggregated taxation that district j is paying. T (xj , x−j ) is the national
aggregated taxation. Meanwhile, b(xj ) is the benefits that district j could get directly
from public spending xj in its district. We assume: (a) the cost for investing in public
projects in each district j is c(xj ) = xj , (b) balanced budget, which means P the cost
of all public projects equals the total taxation, or formally T (xj , x−j ) = ni=1 c(xi ),
(c) taxation is allocated across districts in proportion to population within nj each
n
district, or formally, tj = Pn j ni ; where nj is the population in each district j, (d) the
i=1
1
benefits district j could obtain from public spendings xj is b(xj ) = xj2 , (e) legislators
can only play pure strategies, and (f ) public spendings cannot be negative. What is
the optimal amount of total spending in the country?
h i
1 1 1
A. 4 n1 + n2
h i
B. 21 n12 + n12
1 2

2
h i
C. (n1 +n
2
2) 1
n1
+ 1
n2
2
h i
D. (n1 +n4
2) 1
n2
+ 1
n2
1 2

√
2. (3 points) Suppose u(W ) = W , where W denotes the wealth of an agent. The
agent faces the following gamble: with probability 0.5,wealth is 100, and with proba-
bility, 0.5 a loss occurs so that wealth becomes 64. Then, the certainty equivalent of
the individual will be:
A. 0.5
B. 81
C. 9
D. None of the above

3. (3 points) John is planning to get a bowl of soup at a restaurant called Game Theory
Diner in Cambridge. There are two options on the menu, Clam Chowder (x) and
Brown Windsor soup (y). He decides to order Clam Chowder (x) after carefully
thinking through the available options.However, the waitress tells John that actually
the Clam Chowder is not New England Clam Chowder (x), but Manhattan Clam
Chowder (z). John then decides to order Brown Windsor soup (y). However, after
consulting with the manager, the waitress tells John that actually both New England
Clam Chowder (x) and Manhattan Clam Chowder (z) are available, but John keeps
his order of Brown Windsor soup (y). Which of the following statements is/are true:
A. John’s choices are rationalizable.
B. John’s preferences can be represented by a utility function.
C. John’s preferences can not be represented by a utility function.
D. Both A and B are correct.

4. Mark whether the statements are true or false :


i)In a two-player game, a Nash equilibrium is the outcome that maximizes the sum
of the players’ payoffs.
ii)In a Nash equilibrium in a two-player game, both players must have selected a
dominant strategy.
iii)In the models of oligopoly considered in class, consumers are no better off than in
a perfectly competitive market.
The options for the above subparts are given respectively-

A. T,F,T
B. F,F,T
C. F,T,T
D. T,F,F

5. Suppose that Nescafe has the monopoly of coffee in IIT campus and its cost function
is given by C(Q) = 2Q. Nescafe studied the demand for coffee at IIT and found out
that the inverse demand function can be written as P (Q) = 38 - 2Q.
i) What is the socially efficient output level Qe and the optimal price P e ?
ii)Suppose that Amul, with the same cost function above, sees that Nescafe is making
a lot of money and enters the market. Both firms compete as in the Cournot model.
Solve for each firm’s equilibrium quantity (qCd ,qG
d
) and total profits (π) .
A. i) Qe =18 , P e = 2 (ii) qCd = qG
d
= 6 , π= 144
B. i) Qe =18 , P e = 2 (ii) qCd = qG
d
= 12 , π= 432
C. i) Qe =18 , P e = 2 (ii) qCd = qG
d
= 3 , π= 144
D. i) Qe =9 , P e = 2 (ii) qCd = qG
d
= 6 , π= 144
6. Use the method of Iterated Elimination of strictly dominated strategies. The choices
are given for first and second moves and the Nash Equilibrum/ Nash Equilibria.

Player 1(row player) has 6 strategies and Player 2 has 5 strategies (column player).

A. Suppose Player 1 is moving first and a6 is strictly dominated by a1 only.


Player 2 is moving next and b2 is strictly dominated by b4 . The Nash
equilibrium for this game is (a5 , b5 ).
B. Suppose Player 1 is moving first and a6 is strictly dominated by a1 and
a2 . Player 2 is moving next and b2 is strictly dominated by b4 . The Nash
equilibrium for this game is (6,8).
C. Suppose Player 1 is moving first and a6 is strictly dominated by
a1 and a2 . Player 2 is moving next and b2 is strictly dominated by
b4 . The Nash equilibrium for this game is (a5 , b5 ).
D. None of the above

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