Question
In: Economics
(Table 12.8) Payoffs represent profits measured in thousands of dollars. Firm 2 Develop Product X Develop...
(Table 12.8) Payoffs represent profits measured in thousands of
dollars.
Which of the following outcomes represent(s) a Nash
equilibrium? |
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Solutions
Expert Solution
If Firm 1 develops product A the Firm 2 will develop product Y as pay-off for Firm 2 is highest in such case.
If Firm 1 develops product B then Firm 2 will develop product X as pay-off for Firm 2 is highest in such case.
If Firm 1 develops product C then Firm 2 will develop Product X as pay-off for Firm 2 is highest in such case.
It can be seen that Firm 2 will never develop product Z whatever be the strategy adopted by Firm 1.
So, strategy of developing product Z is strictly dominated and will be eliminated.
Now, Firm 2 has two strategies - To develop Product X or to develop the Product Y.
If Firm 2 develops product X then Firm 1 will develop Product C as pay-off for Firm 1 is highest in such case.
If Firm 2 develops product Y then Firm 1 will develop Product A as pay-off for Firm 1 is highest in such case.
So, Nash equilibrium of this game is (600, 990) and (650, 400).
Hence, the correct answer is the option (4).
Rahul Sunny answered 2 years agoRelated Solutions
The payoff table below provides the profits (in thousands of dollars) for each of four alternatives...
The payoff table below provides the profits (in thousands of
dollars) for each of four alternatives in each of three
supplies.
Supplies
Alternative
S1
S2
S3
A1
112
67
-26
A2
82
85
101
A3
85
72
80
A4
-50
90
110
Suppose that the probabilities for the supplies above are
P(S1) = 0.6,
P(S2) = 0.2, and
P(S3) = 0.1.
Which alternative should be selected under Bayes’ Rule?
What is the expected value of perfect information for this
decision?
Question 5 The data in the incomplete table below represent annual Savings (in thousands of dollars)...
Question 5
The data in the incomplete table below represent annual Savings (in
thousands of dollars) and annual Income (in thousands of dollars)
for a sample of 7 families in Brisbane:
Annual Income X ('000 dollars)
Annual Saving Y ('000 dollars)
X2
Y2
XY
60
10
80
40
100
30
120
49
140
57
180
50
200
70
Total=
Total=
Total= .
Total=
Total=
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