Dimitrios and Ameera work for an international investment bank as foreign exchange traders. They are being questioned by the police on their suspected involvement in a series of market manipulation trades. The table below shows the cost of each strategy (in terms of the length in years of jail sentences they will receive), depending on whether they accuse each other or deny the crime. The first number is the payoff to Dimitrios, while the second number is the payoff to Ameera (the negative numbers signify losses). Assume that the game is a simultaneous one- shot game. Ameera Deny Accuse -2 -2 -15 -15 -8 -8 Based on this information, we can conclude that: Both traders will hold out and deny their involvement. Both traders will accuse each other, even though they will end up being in jail for eight years. Ameera will deny, whatever she expects Dimitrios to do. Dimitrios Accuse Deny

Dimitrios and Ameera work for an international investment bank as foreign exchange traders. They are being questioned by the police on their suspected involvement in a series of market manipulation trades. The table below shows the cost of each strategy (in terms of the length in years of jail sentences they will receive), depending on whether they accuse each other or deny the crime. The first number is the payoff to Dimitrios, while the second number is the payoff to Ameera (the negative numbers signify losses). Assume that the game is a simultaneous one- shot game. Ameera Deny Accuse -2 -2 -15 -15 -8 -8 Based on this information, we can conclude that: Both traders will hold out and deny their involvement. Both traders will accuse each other, even though they will end up being in jail for eight years. Ameera will deny, whatever she expects Dimitrios to do. Dimitrios Accuse Deny

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Bonnie and Clyde have been accused of committing a crime. The police have given each an opportunity to confess to the crime. Bonnie and Clyde are put in separate rooms, and each must decide whether to confess or not without knowing the other's choice. Corresponding prison terms for each outcome are represented in the payoff matrix to the right. Predict the outcome of the game. O A. Bonnie will not confess and Clyde will confess. Clyde Not confess Confess O B. Bonnie will confess and Clyde will not confess. Bonnie O C. Bonnie and Clyde will both confess. 3 years 1 year O D. Neither Bonnie nor Clyde will confess. Not confess 3 years 8 years 8 years 6 years Confess 1 year 6 years
The following table contains the possible actions and payoffs of players 1 and 2. Player 2 Cooperate Player 1 Cooperate Not Cooperate 15, 15 20, -10 Not Cooperate -20, 20 10, 10 This game is infinitely repeated, and in each period both players must choose their actions simultaneously. If both players follow a tit-for-tat strategy, then they can Cooperate in equilibrium if the interest rate r is ✓. At an interest rate of r=0.5, If instead of playing an infinite number of times, the players play the game only 10 times, then in the first period player 1 receives a payoff of
2. Paul and Stella play a game with three strategies each, T, M, and B for Paul, and L, C, and R for Stella. Both move simultaneously. The payoffs are given by the following form: Stella L с R Paul T (8,4) (10, 2) (2,3) M (4,2) (10, 1) (5,7) B (1,4) (10, 3) (9,-4) a. Which strategy is dominated? b. What is the pure-strategy Nash equilibrium? Identify all if there are more than one. c. If Paul moved first, so that Stella observed it, which strategy would Paul choose?
the Consider a simultaneous-move integer game between two players: Marilyn and Noah. Each of player is required to announce a positive integer between 1 to 4. In other words, a player can announce 1, 2, 3, or 4. Two players announce their integers simultaneously. Notice that this game is different from the games we learned in class in that each player has four actions to take. The payoffs of the players in the game are specified as follows: (1) when the two announced integers are different, whoever reports the lower number pays $1 to the other player, so that the loser of the game has payoff -1 and the winner of the game has payoff 1; (2) when the two players announce the same integer, their payoffs are both O. What is Marilyn's maximin strategy? 01 02 03 O
1) Define Cartel and give an example. 2) Thelma and Louise are being charged for a murder/robbery. They are separated by police and interrogated. They are given the choice to confess or not to confess. The payoff matrix below identifies the years that they will each spend in jail, for the various outcomes. Louise Confess Don't Confess Confess (2 10,10 15.2 Thelma Don't Confess 2,15 3,3 a. Identify the Dominant Strategy for either player, or state that there isn't one. Remember, a "Strategy" is the players move. In this example, state "Confess" or "Don't Confess" for each player, not the payoff. b. Identify the Nash Equilibrium.
Bernie and Leona were arrested for money laundering and were interrogated separately by the phone. Bernie and Leona were each presented with the following independent offers. If one confesses and the other doesn’t, then who confesses goes free and the other will receive a 20-year prison sentence; if both confess, each receives a 10-year prison sentence; and if neither confesses, each will only receive a 2-year prison sentence.a. Use the above information to construct a payoff matrix for Bernie and Leonab. Does either Bernie or Leona have a dominant strategy? Why or why not?c. Does a Nash equilibrium exist? Why or why not?
The following table contains the possible actions and payoffs of players 1 and 2. Player 2 Cooperate Not Cooperate Player Cooperate 15 , 15 -20 , 20 1 Not Cooperate 20 , -10 10 , 10 This game is infinitely repeated, and in each period both players must choose their actions simultaneously. If both players follow a tit-for-tat strategy, then they can Cooperate in equilibrium if the interest rate r is . At an interest rate of r=0.5, . If instead of playing an infinite number of times, the players play the game only 10 times, then in the first period player 1 receives a payoff of
So imagine you are playing this game as the second player and you are both given a 10 dollars and the dictator decides to offer you 25 cents and that she/he will keep $9.25. Your only choice is to accept the 25 cents or reject the offer and get no money at all. What would you do? What would be considered ‘rational’ from the perspective of utility maximization? What would you do if this is a continued game and the same scenario will happen multiple times not just once? Do you think others will react the same way you would?
suppose that the world is comprised of two countries: X and Y. Because of the absence of centralized world governance, the control of global externalities is particularly challenging, which is the case with greenhouse gases linked to climate change. The entries in the following Payoff Table describe each country's well-being under different abatement patterns: X\Y No Abate Abate No Abate 12,12 24,8 Abate 8,24 20,20 Now suppose that the game is repeated indefinitely. Define the concepts of Trigger Strategies and also the concept of Business as Usual Strategies for the repeated game. Verify that trigger strategies supporting cooperative payoffs (20,20) constitute a non-cooperative equilibrium of the repeated game when δ=0.8. Are trigger strategies still an equilibrium when δ=0.30? Explain intuitively why and verify that Business as Usual still is an equilibrium in this case.
Two players, Row and Column, will simultaneously and independently decide whether to 'share' or 'steal'. Cash outcomes have a 'prisoner's dilemma' structure. However, Column feels shame s > 0 if they choose 'Steal'. Row's payoff is their cash outcome; Column's is their cash outcome, minus their shame if they 'Steal'. The following matrix summarizes (each cell has Row's payoff first, and Column's second): Column Share Steal 5, 5 8,0 Share 0,8 – s 2,2 – s Row Steal This game has a unique Nash equilibrium, but it depends on s. What is the Nash equilibrium of this game, for different values of s? Explain.
Mary and Raj are the only two growers who provide organically grown corn to a local grocery store. Table below represents the choices available to Mary and Raj and the payoffs associated with each outcome. What is the best choice for Raj if he is sure that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoner’s dilemma result? (A = Work independently; B = Cooperate and Raise prices. Each results entry lists Raj earnings first, and Mary's earnings second.) Mary A B Raj A ($100, $100) ($200, $0) B ($0, $200) ($150, $150)
Consider the infinite repeated two-player game where at each stage the play- ers play the non-zero-sum game given by A В A (5, 5) (0,7) В (7, 0) | (2, 2) (a) Consider the following strategies: SA: always play A. SB: always play B. • St: play A on the first stage, thereafter copy what the other player did in the preceding stage. Suppose that the total payoff involves a discount factor 8, and that both players are restricted to the pure strategies SA, SB, and sT. Determine the set of d for which (ST, ST) is a Nash equilibrium. (b) Use the one stage deviation principle to determine whether the pair (ST, ST) is a subgame perfect Nash equilibrium for some range of val- ues of 8.