Describe what it means to say a strategic game played with 2 players is in a...

Describe what it means to say a strategic game played with 2 players is in a Nash equilibrium. Then, describe the standard trust game, and identify the Nash equilibrium. Explain why this equilibrium is a Nash Equilibrium. Finally, explain why people actually playing this game might not play as the Nash Equilibrium predicts.

Solutions

Expert Solution

A strategic game played with 2 players is in a Nash equilibrium when each player's strategy is optimal. Every player wins because all get the outcome which they desire. For example strategy A means to recieve a chocolate, strategy B is loose a chocolate. Both players will choose strategy A and take a chocolate. Even if one players strategy is revealed to the other, both players will still select Strategy A. Thus A is the Nash equilibrium and the game is in a Nash equilibrium as no player has an incentive to change his strategy given what the other players are doing.

The standard trust game is when the first player decides how much endowment to give to the second player. The first player who is the sender, is also informed that whatever they send will be tripled by the experimenter and given to the second player. The second player will know decide how much to give to the first player back. Nash equilibrium will be for the first and the second player to give as little as possible in order to have a higher payoff. As player 1 knows that the amount will be tripled so player 1 will select the best strategy which is give as little as possible as the amount will be tripled anyways. Player 2 will also pursue their best possible strategy which is give as little money back in order to pursue their best possible strategy that is maximising wealth. This is the Nash equilibrium where both the participants are pursing their best possible strategy given the strategies of the other player.

People playing this game might not play as the Nash equilibrium predicts because the 2nd player in most cases sends the money back and also the first player sends almost 50% of the endowment. This showcases that people do not just care about their own wealth, they also care about others.

Rahul Sunny answered 5 months ago

Next > < Previous

Related Solutions

Coin taking game This game is played between 2 players, player 1 and player 2. There...

Coin taking game This game is played between 2 players, player 1 and player 2. There are two piles of coins. The values of a coin can be any integer. Both players know the values of all coins in both piles. Player 1 makes the first move, and play alternates between the players. A move consists of taking a coin from the top of either of the piles (either player can take from either pile). The game ends when both...

3.The “Guess-the Mean Game” is played as follows: Each of the N players writes on a...

3.The “Guess-the Mean Game” is played as follows: Each of the N players writes on a piece of paper an integer between 1 and 10 without showing it to any other players. The players then reveal the numbers they have written down. The winner is that person whose number comes the closest to equaling half the average of the number submitted by the other players. For example, if there are four players and they write down the numbers 1, 3,...

In business, strategic situations like the advertising game presented are not played once --- the firms...

In business, strategic situations like the advertising game presented are not played once --- the firms evaluate their strategies periodically and can repeat these games for many months, quarters, or years into the indefinite future. Even for relatively simple games like those presented in this chapter (e.g., two players with two possible actions), the Nash equilibria for infinitely repeated games are very difficult to derive analytically. Economists have used numerical tools to simulation the outcomes from different strategies that the...

1-If a static game where both players have dominant strategies was to be played sequentially, A....

1-If a static game where both players have dominant strategies was to be played sequentially, A. the outcome of the dynamically played game would be the same with the outcome of the simultaneously played game. B. the Nash equilibrium of the game will not be sub-game perfect. C. the dominant strategies will no longer exist. D. the outcome of the dynamically played game would be different than the outcome of the simultaneously played game. 2- A sub-game perfect Nash equilibrium...

5. Consider the following games played between two players, A and B. Game 1: A and...

5. Consider the following games played between two players, A and B. Game 1: A and B have reached a verbal agreement: A would deliver a case of beer to B, and B would deliver a bag of beer nuts to A. Now, each player needs to take an action: keep the promise (to deliver the goods), break the promise. If both keep their promises, then each player gets a payoff of 5; if both break their promises, then each...

3.50 Passedix is a game of chance played with three fair dice. Players bet whether the...

3.50 Passedix is a game of chance played with three fair dice. Players bet whether the sum of the faces shown on the dice will be above or below ten. During the late sixteenth century, the astronomer and mathematician Galileo Galilei was asked by the Grand Duke of Tuscany to explain why “the chance of throwing a 9 with three fair dice was less than that of throwing a 10.” (Interstat, Jan. 2004) The grand duke believed that the chance...

Background: In the game “Rock, Paper, and Scissors,” two players simultaneously say (or display a hand...

Background: In the game “Rock, Paper, and Scissors,” two players simultaneously say (or display a hand symbol representing) either “rock,” “paper,” or “scissors.” The winner is the one whose choice wins over the other. The rules are: paper wins over (wraps) rock, rock wins over (breaks) scissors, and scissors wins over (cuts) paper. Assignment: A customer wants you to design and implement a program (RPS.py) for playing the game of “Rock, Paper, Scissors” for a single player against the computer....

What would be the equilibrium of the classic game “Chicken” if it was played as a...

What would be the equilibrium of the classic game “Chicken” if it was played as a Stackleberg game in which one player gets to decide first?

Describe in 100 words or less what it means when we say the capital market is...

Describe in 100 words or less what it means when we say the capital market is efficient and outline its implications. If the capital market is efficient, does it mean you can expect to do well as the market by randomly picking stocks to form a portfolio? Explain why or why not.

Monshimout is a game from the Cheyenne people and played by women. It could be played...

Monshimout is a game from the Cheyenne people and played by women. It could be played by two or more players, and if played by more than two, then the players divided into two equal teams. Game equipment consisted of five plum stones and a basket made of woven grass or willow twigs. The basket measured 3-4 inches deep, 8 inches across at the top, and almost 1/2 inch thick. The plum stones were left plain on one side, but...

Subjects