Discuss the strengths and weaknesses of game theory in predicting economic outcomes. In your explanations, you are expected to discuss the role of iterated elimination of dominated strategies and Nash equilibria and to provide examples.
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- Define the term "game theory" in context of economics. Can you please provide it in detail. Thankyou!Game theory can capture strategic situations where your outcome depends not only upon your own choice but also upon the choice of another. Present a coordination game of your choice where you and another player each have two choices or strategies. Explain in words the Nash Equilibrium concept, and identify the Nash equilibrium or Nash equilibria for your game. Explain why the outcomes that are not Nash equilibria are not.Nash equilibrium refers to the optimal outcome of a game where there is no incentive for the players to deviate from their initial strategy. An individual (or player) can receive no incremental benefit from changing actions, assuming other players remain constant in their strategies. Given this premise, can there be a no Nash equilibrium?
- Evolutionary game theory provides a framework for understanding the emergence of preferences and behavior. Why are theoretical methodologies that employ the rational actor model an evolutionary stable strategy for economists?Consider the following Guessing Game. There are n = 10 players simultaneously choosing a number in {1, 2, 3}. The winners are those closest to 1/2 the average guess (they evenly split the prize between the winners if there is more than one). Find the set of rationalizable strategy profiles. Justify your answer. please no handwriting and this course about game theory (topic Rationalizability) answer with all steps, pleaseGame theory is a useful tool for analyzing Situations in which multiple parties make decisions that do not affect each other. Situations in which multiple parties make decisions with the potential to affect each other. Situations in which multiple parties make decisions. Situations in which one party makes a decision with the potential to affect other parties. Any situation in which a decision must be made.
- Which of the following problems makes it difficult to interpret human experiments using cooperation games based on economic game theory? If you compare humans from different cultures, you get different results which defeats the purpose. These games do not test human behavior under conditions that are ecologically realistic. Economic game theory assumes that humans are selfish, but actually we are cooperative. Humans choose to cooperate because they are related.Find all Nash equilibria for the two-player game (image attached). Provide necessary computation.Select the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix Prisoners' Dilemma Game A case in which individually rational behavior leads to a jointly inefficient outcome A player's best choice, if it exists, regardless of his or her opponent's strategy A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again The event that occurs when agents in a game form an agreement about which strategies to implement
- Select the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix Prisoners' Dilemma Game A player's best choice, if it exists, regardless of his or her opponent's strategy A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents A visual representation of a game showing all possible strategies for each player and all potential outcomes and payoffsWhich of the following is not a solution concept in game theory? Rationalizable outcomes Nash equilibrium Iterated elimination of dominant strategies Subgame perfect equilibrium None of the above (all are solution concepts) No AnswerTrue or false? If a game has a Nash equilibrium, that equilibrium will be the equilibrium that we expect to observe in the real world. False. People don’t always act in the way that a Nash equilibrium requires. People don’t always make the necessary calculations and they take into account the outcome of others. False. A Nash equilibrium is based on very strict assumptions that rarely hold in the real world. No real-world situation leads to a Nash equilibrium. True. As long as people are rational and have their own self-interest at heart, real-life games will result in the Nash equilibrium. True. Nash’s theory of equilibrium outcomes was derived from real-world interactions. The theory holds true for almost all real-world scenarios.