Question

1. For the following payoff matrix, find these:

a) Nash equilibrium or Nash equilibria (if any)

b) Maximin equilibrium

c) Collusive equilibrium (also known as the "cooperative equilibrium")

d) Maximax equilibrium

e) Dominant strategy of each firm (if any)

				Firm A
				Strategy X	Strategy Y
Firm B			Strategy X	200 23	250 20
			Strategy Y	30 50	1 500

2. For the following payoff matrix, find these:

a) Nash equilibrium or Nash equilibria (if any)

b) Maximin equilibrium

c) Collusive equilibrium (also known as the "cooperative equilibrium")

d) Maximax equilibrium

e) Dominant strategy of each firm (if any)

				Firm 1
				Strategy K	Strategy L	Strategy M
Firm 2			Strategy Q	23 20	200 250	20 70
			Strategy R	500 300	50 100	700 400
			Strategy S	80 1200	220 10	620 320

3. A player can choose one of these three options, A, B or C:

Option A has a 30% probability of a $100 gain and a 70% probability of a $200 gain

Option B has a 50% probability of a $10 gain and a 50% probability of a $300 gain

Option C has a 100% probability of a $110 gain.

a) Which option will a maximin player choose? Explain your answer

b) Which option will a maximax player choose? Explain your answer

c) Which option will a risk-neutral person choose? Support your answer with calculations

Answer 1