ECON 101 Lecture Notes - Lecture 7: Nash Equilibrium, Subgame, Backward Induction

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6 Dec 2017

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Payoffs in sequential-move game are depicted in an . Contains a decision node and all decision nodes that follow the decision node. Strategies of players if the strategies are nash equilibrium. Subgame-perfect nash equilibrium (spne): in every subgame. 0) write the game as an extensive-form game tree. 1) start at the end of the game tree and identify the nash equilibrium for each subgame. 2) replace each final subgame by payoffs that result in the nash equilibrium of the corresponding final subgame, result in . 2. rich can save rich saves, the poor can borrow and invest. 7. interest rates are fixed (not dependent on the level of inflation) Low-inflation i. ii. iii. hourly wage is /hr in low inflation, 2. 5 hr hourly wage /hr in high-inflation economy, 1 hr therefore, high inflation . (work less: how much + (_ worth to the lenders when they get their money back? .

Related Questions

QUESTION 1

Stackelberg duopoly game is also known as the ________ model. If we change the Stackelberg ______ competition game to a simultaneous-move game, we get the ______ game results.

	A.	leader-follower, quantity; Cournot
	B.	Competitive fringe; price; backward induction
	C.	leader-follower, quantity; Bertrand
	D.	entry, price; Cournot

QUESTION 2

Comparing Stackelberg and Cournot competition results, we can say that the _____ is better off while the ______ is worse off under Stackelberg than under Cournot results. This result show that there is _______________ advantage.

	A.	entrant, incumbent, investment
	B.	leader, follower, first-mover
	C.	follower, leader, a size
	D.	incumbent, entrant, first-mover

QUESTION 3

Mark all the FALSE statements

	A.	An equilibrium is a collection of strategies (and a strategy is a complete plan of action), whereas an outcome describes what will happen only in the contingencies that are expected to arise, not in every contingency that might arise.
	B.	In games of complete but imperfect information, backward induction is still the strongest process to solve the model to get unique equilibrium.
	C.	All subgame perfect Nash equilibria (SPNE) are Nash equilibria (NE), but not all Nash equilibria is SPNE
	D.	We cannot apply the notion of Nash equilibrium to dynamic games of complete information if we allowed a player s strategy to leave unspecified actions in some contingencies.
	E.	A game can be of perfect information whenever Nature or Luck does not play, each information set does not necessarily need to have a single node.

QUESTION 4

True or false. Mark the correct sequence:
I. Simultaneity of moves means that these games have imperfect information.
II. Dynamic games of complete and perfect information do not necessarily need that a player observes all the previous moves, just part of them are fine.
III. Backward induction and subgame perfect equilibrium concept lead to the same result in games of incomplete information.
IV. Any game in extensive form is a subgame itself.

	A.	TFFT
	B.	TTTF
	C.	FTFF
	D.	TTFT

QUESTION 5

The subgame perfect Nash equilibrium is the equilibrium associated with ____________ outcome. Subgame perfect equilibrium ________ non-credible threats.

	A.	Maxmin; involves
	B.	the backward induction; does not involve
	C.	Iterative deletion of weakly dominated strategies; rules out
	D.	the backward induction; includes

QUESTION 3

Mark all the FALSE statements

	A.	An equilibrium is a collection of strategies (and a strategy is a complete plan of action), whereas an outcome describes what will happen only in the contingencies that are expected to arise, not in every contingency that might arise.
	B.	In games of complete but imperfect information, backward induction is still the strongest process to solve the model to get unique equilibrium.
	C.	All subgame perfect Nash equilibria (SPNE) are Nash equilibria (NE), but not all Nash equilibria is SPNE
	D.	We cannot apply the notion of Nash equilibrium to dynamic games of complete information if we allowed a player s strategy to leave unspecified actions in some contingencies.
	E.	A game can be of perfect information whenever Nature or Luck does not play, each information set does not necessarily need to have a single node.

20 points

QUESTION 4

	A.	TFFT
	B.	TTTF
	C.	FTFF
	D.	TTFT

20 points

QUESTION 5

The subgame perfect Nash equilibrium is the equilibrium associated with ____________ outcome. Subgame perfect equilibrium ________ non-credible threats.

	A.	Maxmin; involves
	B.	the backward induction; does not involve
	C.	Iterative deletion of weakly dominated strategies; rules out
	D.	the backward induction; includes

ECON 101 Lecture Notes - Lecture 7: Nash Equilibrium, Subgame, Backward Induction

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