ECON 402.

Fall 2015 HOMEWORK 2

ECON 402. Fall 2015 HOMEWORK 2

Question
ECON 402. Fall 2015
HOMEWORK 2
Due in class on Thursday, September 24th
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ECON 402. Fall 2015 HOMEWORK 2

Question
ECON 402. Fall 2015
HOMEWORK 2
Due in class on Thursday, September 24th
1. Consider the following matrix game.

(a) Find u1 (?1 , M ) for ?1 =

117
,,
10 5 10

(b) Find u2 (?1 , R) for ?1 =

2
1
, 0, 3
3

(c) Find u1 (?1 , ?2 ) for ?1 =

111
,,
326

and ?2 =

131
,,
882

1/3
(d) Find u2 (?1 , ?2 ) for ?1 =

111
,,
326

and ?2 =

131
,,
882

2. Consider the following matrix game.

(a) Find u1 (?1 , ?2 ) for ?1 =

311
,,
4 6 12

(b) Find u2 (?1 , ?2 ) for ?1 =

313
,,
5 10 10

and ?2 =
and ?2 =

1 1 13 1
,,,
10 20 20 5
1 1 3 17
,,,
30 5 15 30

.
.

3. Consider a Cournot duopoly model where the market price is given by the inverse
demand function:
p = 30 ? 3 · q1 ? q2 .
And suppose each ?rm produces at a cost of 25 per unit of production (i.e, total costs
2/3
 are given by 25 · qi for i = 1, 2).
(a) Find the payo? functions u1 (q1 , q2 ) and u2 (q1 , q2 ).
(b) Suppose player 1 believes that player 2 is equally likely to produce q2 = 10,
q2 = 15, q2 = 18 and q2 = 22 units, and these are the only production values
player 1 believes player 2 can choose. Let ?2 denote these beliefs for player 1.
Compute u1 (q1 , ?2 ) for these beliefs ?2 .
(c) Suppose player 2 believes that player 1 will produce q1 = 13 with probability 1/3,
q1 = 10 with probability 1/4, and q1 = 16 with probability 5/12, and these are
the only production values player 2 believes player 1 can choose. Let ?1 denote
these beliefs for player 2. Compute u2 (?1 , q2 ) for these beliefs ?1 .

ECON 402. Fall 2015 HOMEWORK 2

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