HW4 GT

1. Formally specify the strategic game described in the cartoon: players, strategies,
and payoffs (payoff matrix). Would the order of moves matter in the game (if
players were to move sequentially instead of simultaneously)? Explain.

The simultaneous-move game is formally specified as follows:

Players: Wally and Dilbert
Strategies for each player: {Rat, Praise}
Payoff matrix is as in the Prisoner’s Dilemma. For example:

Dilbert
Wally
Rat Praise
Rat
Praise

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 2. Consider the simultaneous-move game represented by the following payoff
matrix:
Column
Left Right
Up 3,3 4,4
Row
Down 4,2 3,10

a) Does Row have a (strictly) dominant strategy? Which?

b) Does Column have a (strictly) dominated strategy? Which?

c) Is there an equilibrium in dominant strategies? Which?

d) Identify all the Nash equilibria.

3. Consider a simultaneous divide-a-dollar game, in which players simultaneously

make demands to divide a dollar; each player receives his demand if the sum of
the demands does not exceed one, and the payoff is zero otherwise. What are the
Nash equilibria in this game?

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 4. You are working with a friend on a joint project. Each of you can either work
hard or goof off. If your friend works hard then you prefer to goof off (the
outcome of the project would be better if you worked hard too, but the increment
in its value to you is not worth the extra effort). You prefer the outcome of your
both working hard to the outcome of your both goofing off (in which case nothing
gets accomplished), and the worst outcome for you is that you work hard and your
friend goofs off (you hate to be exploited).

a) Assuming that your friend has the same preferences, show a matrix form
representation of the game. Which game has the same incentive structure?

Friend
You
Work Goof Off
Work
Goof Off

b) How would the game change if each person were to prefer to work hard than to
goof off when the other person works hard? Show the payoff matrix for the
alternative game. Which game has the same incentive structure?
Friend
You
Work Goof Off
Work
Goof Off

5. Find all the Nash Equilibria in the game:

Firm 1\Firm 2 X Y Z
A 10, 30 0, 20 20, 30
B 15, 35 10, 40 10, 40
C 25, 25 5, 25 5, 25