Question

In: Statistics and Probability

Exercise #6 (game theory and choice question) PLEASE TYPE OUT ANSWER We are presented with...

Exercise #6 (game theory and choice question) PLEASE TYPE OUT ANSWER

We are presented with land use choices. Individuals are free to choose their own development strategy based on the profit potential of the development

.

a) Does either landowner have a dominant strategy? (5 Points) A dominant strategy is what you are going to do, knowing what they are going to do—this leads to the Nash Equilibrium Explain how and what the dominant strategy is (hint, there does not need to be two dominant strategies).

b) Is there a Nash equilibrium? Explain. (5 Points)

d) What is the socially optimal solution? (5 Points)

e) How can we arrive at the optimal solution (consider the Coase Solution). Explain the necessary payoff. (5 Points)

Payoff Matrix

Davis

Alfalfa Dairy Farm

Apartment House B: Profit =$700 B: Profit = $400

D: Profit =$180 D: Profit = $425

Benson Commercial Real Estate B: Profit =$650 B: Profit = $455

D: Profit =$400 D: Profit = $500

Expert Solution

Answer:-----

a)

If Davis chooses Dairy farm, his (i.e. Davis's) payoff is always more than the payoff if he would have chosen Alfalfa (i.e. 425 > 180 and 500 > 400).

This means Davis will always be better off by choosing Dairy Firm over Alfalfa. So, the Dairy Farm is the dominant strategy of Davis.

However, for Benson, 700 > 650 for Davis taking Alfalfa but 400 < 455 for Davis taking Dairy Firm.

So, Benson does’nt have any dominant strategy.

b)

Davis takes Alfalfa => Best strategy for Benson is Apartment House (as 700 > 650)

Davis takes Dairy Firm => Best strategy for Benson is Commercial Real Estate (as 455 > 400)

Benson takes Commercial Real Estate => Best strategy for Davis is Dairy Firm (as 500 > 400)

Benson takes Apartment House => Best strategy for Davis is Dairy Firm (as 425 > 180)

We underline these observations and find the matrix as,

	Payoff Matrix
		Davis
		Alfalfa	Dairy Farm
Benson	Apartment House	B: Profit = 700 D:Profit = 180	B: Profit = 400 D: Profit = 425
	Commercial Real Estate	B: Profit = 650 D: Profit = 400	B: Profit = 455 D: Profit = 500

Payoff Matrix Davis Alfalfa B: Profit 700B:Profit 400 D: Profit 180 D: Profit 425 Dairy Farm Benson Apartment House Commercial

Note that the fourth quadrant is marked complete, so, the Nash equilibrium is Davis taking Dairy Farm and Benson taking Commercial Real Estate.

d)

A socially optimal solution is that for which the total payoff of both the players is the maximum.

e)

This happens for Davis taking Alfalfa and Benson taking Commercial Real Estate. The total payoff is 1050 which is larger than the other three combinations.

orchestra answered 1 year ago

Please answer the multiple choice question. Only choose one answer choice. Then write an IRAC answer...

Please answer the multiple choice question. Only choose one answer choice. Then write an IRAC answer about the issue that is being tested. Peter built a small pond in front of his house for his prize koi fish. The pond was visible from the sidewalk. To keep people and animals away, Peter constructed an eight-foot high chain link fence between the sidewalk and the pond. One day, Stewie, a six-year old who lived next door, struggled over the fence to...

Short Answer Question Please choose one of the theories or theory categories that we have discussed...

Short Answer Question Please choose one of the theories or theory categories that we have discussed so far (biological, behavioral, Tolman’s purposive behavior, expectancy value theory, or force field theory) and discuss how it could be used to motivate someone. Please be sure to write at least three sentences.

Exercise #6 We are presented with land use choices. Individuals are free to choose their own...

Exercise #6 We are presented with land use choices. Individuals are free to choose their own development strategy based on the profit potential of the development . a) Does either landowner have a dominant strategy? (5 Points) A dominant strategy is what you are going to do, knowing what they are going to do—this leads to the Nash Equilibrium Explain how and what the dominant strategy is (hint, there does not need to be two dominant strategies). b) Is there...

Please type out answer, thank you. Question 1 On October 1, 2018, the Marshall Company sold...

Please type out answer, thank you. Question 1 On October 1, 2018, the Marshall Company sold a large piece of machinery to the Hammond Construction Company for $80,000. The cost of the machine was $40,000. Hammond made a down payment of $10,000 and agreed to pay the remaining balance in seven equal monthly installments of $10,000, plus interest at 12% on the unpaid balance, beginning November 1. Required: Identify three alternative methods for recognizing revenue and costs for the situation...

How can we use game theory to improve strategic decision-making? How can we use game theory...

How can we use game theory to improve strategic decision-making? How can we use game theory in the construction and/or design of a strategy?

Please answer Part 2 (b) And please type your answer,hand-writing is sometimes hard to figure out...

Please answer Part 2 (b) And please type your answer,hand-writing is sometimes hard to figure out Before mid-night thanks Part 1 Waterways has a sales mix of sprinklers, valves, and controllers as follows. Annual expected sales: Sale of sprinklers 460,000 units at $26.50 Sale of valves 1,480,000 units at $11.20 Sale of controllers 60,000 units at $42.50 Variable manufacturing cost per unit: Sprinklers $13.96 Valves $ 7.95 Controllers $29.75 Fixed manufacturing overhead cost (total) $760,000 Variable selling and administrative expenses...

Question 6: Define two concrete mixture performance problems caused by aggregate properties. Please TYPE your answer,...

Question 6: Define two concrete mixture performance problems caused by aggregate properties. Please TYPE your answer, no hand writing. Thank you

TOPIC: Game Theory and Equilibria In the collusion game, we found that collusion was only sustainable...

TOPIC: Game Theory and Equilibria In the collusion game, we found that collusion was only sustainable in the infinite horizon repeated game. One Nash Equilbrium of that game can be found when all players play a “grim trigger” strategy, where they collude until an opponent chooses to compete, and then compete for all future rounds as a punishment. In such a game, if the one period bonus that comes from competing is low enough, firms always collude and the punishment...

Please answer the question with well thought-out and complete sentences. Answer need to be supported by...

Please answer the question with well thought-out and complete sentences. Answer need to be supported by research-based facts. Many families struggle to make decisions about the best living situation for their aging parent. Most seniors, if given the choice, would choose to remain in their own home for as long as possible, and most families want to respect that choice. What is it that makes staying home possible? This is very subjective and varies in each situation. Many family members...

Please answer and explain questions 1 to 4 from this problem thanks. Class: Game Theory Problem...

Please answer and explain questions 1 to 4 from this problem thanks. Class: Game Theory Problem 1 Two players, A and B play the following game. First Player A must choose IN or OUT. If Player A chooses OUT the game ends, and the payoffs are Player A gets 4, and Player B gets 0. If Player A chooses IN then Player B observes this and must then choose in or out. If Player B chooses out the game ends,...