Question

In the game of Chicken what is the equilibrium if each player chooses sequentially as in Stackelberg?(answer in 100 words)

Answer 1

economists generally believed that markets should, ideally, arrive at equilibrium, and stay there. Some economists had argued that volatility was purely the result of speculators and inefficiencies in the foreign exchange market, like asymmetric information, or adjustment obstacles. Dornbusch rejected this view. Instead, he argued that volatility was more fundamental to the market than this, much closer to inherent in the market than to being simply and exclusively the result of inefficiencies. More basically, Dornbusch was arguing that in the short-un, equilibrium is reached in the financial markets, and in the long run, the price of goods responds to these changes in the financial markets.