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Tutorial 2 questions

Tutorial 2 questions

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Navin Golyan
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13 views

Tutorial 2 questions

Tutorial 2 questions

Uploaded by

Navin Golyan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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TUTORIAL 2

1. Represent the following strategic interaction using payoff matrices. A couple (a


she and a he) is going out for an evening. They have two options: watching a
boxing match or going to an opera. Unfortunately his mobile phone runs out
of battery. Unable to reach each other, each of them needs to go to one of the
possible venues without knowing where his/her partner has gone. Spending the
evening alone (whether at the boxing or the opera) is the worst outcome for both
of them. Conditional on going out together, she prefers boxing to opera while he
prefers opera to boxing. Make “she” Player 1 when writing the payoff matrix, and
choose utility values that represent each player’s ordinal utility.

2. Three firms use water from a lake. Each firm has two possible actions: treat
sewage (T) or dump sewage (D). If no or only one (1) firm dumps sewage, the
lake remains clean. If two or more firms dump sewage, the lake becomes polluted.
Each firm gets a revenue of 4 if the lake is clean, and a revenue of 1 if the lake is
polluted. The cost of treating sewage is 1. There is no cost to dumping sewage.
Each firm’s payoff is given by its revenue minus sewage treatment cost, if any.
(a) Describe this situation as a normal form game using payoff matrices.
(b) Is there a (strongly or weakly) dominated action for each player? If yes, which
one? If no, explain why.

3. Is the following statement true or false for a two person game: “If strategy a of
agent i is weakly dominant, then there must exist a strategy s of the opponent
such that for all strategies b ̸= a of agent i, (b, s) yields a payoff to agent i that is
strictly less than the payoff (a, s) yields to agent i.” Briefly explain.

4. Solve the following game using iterative elimination of strongly dominated actions.
L C R
T 1,1 9,0 7,9
M 2,2 5,1 8,1
B 1,3 4,4 7,2

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