Worksheet on Game Theory ECO 514 Spring 2024

Question 1
Q1. Consider the game below.
a. Are there any pure strategy equilibria? Why or why not?
b. Find the mixed strategy equilibrium. Explain your results.

Question 2
For the game shown below:
a. Write out the reduced normal form. Discuss the process you followed.
b. Find all Nash Equilibria.
c. Find the subgame perfect equilibrium. Explain how you arrived at your results.

Question 3
Consider a market with two firms where the market demand function is P=60-2Q. Firm 1 has a
marginal cost of production MC1 = 4, and firm 2’s marginal cost of production is MC2 =20. There
are no fixed costs. Fill in the table below.

Question 4
What will happen if the market was a monopoly?

END OF THE WORKSHEET