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CHAPTER 7 GAME THEORY Solution For Advanced Microeconomic Theory GEOFFREY A. J EHLE
CHAPTER 7 GAME THEORY Solution For Advanced Microeconomic Theory GEOFFREY A. J EHLE
CHAPTER 7 GAME THEORY Solution For Advanced Microeconomic Theory GEOFFREY A. J EHLE
Suppose player 2‘s behavior strategy as: play l and r with probability of ½ respectively, player 2’s
expected payoff would be: P(x)*(1/2*0+1/2*4) + P(y)*(1/2*4+1/2*0) =2[P(x) + P(y)] =2
So, player 2’s expected payoff of playing m would be 1*[P(x) + P(y)] =1<2
2. Denote that player 2’s information set has the nodes from left to right as α1, α2, α3, α4
Given player 1’s behavior strategy, using Bayes rule, player 2’s belief would be:
The player 2’s expected payoff of playing left would be: -1*α1+1*α2+0*α3+1*α4=1/2
The player 2’s expected payoff of playing right would be: 1*α1+0*α2+1*α3-1*α4=0
Thus, the player 2 would have the probability of 1 (P = 1) to choose the left.