CHAPTER 7 GAME THEORY Solution For Advanced Microeconomic Theory GEOFFREY A. J EHLE

You might also like

You are on page 1of 1

1.

Assume that player 2’s belief is as follows,

In the information set, the Node x will be reached with P(x)

In the information set, the Node y will be reached with P(y)

And P(x) + P(y) =1

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

Thus, the assessment (p, b) is not the sequential rational

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:

For the node α1: 1/2*1/3=1/6

For the node α2: 1/2*2/3=1/3

For the node α3: 1/2*1/3=1/6

For the node α4: 1/2*2/3=1/3

Suppose that player 2 would choose left with the probability of P;

choose right with the probability of 1-P:

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.

3. Player i has strategies: ∏Mn= M1* M2* M3* …Mn

You might also like