, WA jionly GAME THEORY - Mid-term exam, 14st April 2018) First name Last name, TOpee GE+GADE (English) 1. For the strategic game below: a, (0.2 points) Choose one possible value for parameters @ and b such that for player 1 strategy A weakly dominates strategy B and strategy C strictly dominates strategy A. Argue your answer. b. (0.2 points) Does the resulting game have an equilibrium in (strictly) dominant strategies? What about in (weakly) dominant strategies? Argue your answer. & (0.2 points) Is the strategy profile (5,2) = (B, ¥) a Nash equilibrium of the game? Argue your answer. 4 (0.2 points) Is the strategy profile (s,,8,) = (C,Z) a strict or @ weak Nash equilibrium of the game? Argue your answer. Zz 5 i 6 E 8 a) Fic shales. © IS skckuy duvet A we eQrve ALY Rr onalegy & No weakly donne PB coe MQuve b=e-. Oe % 4) ey bila | 31a. NS Toke,tor eosgle a>b =% Biles | al | Se we gael for any 0 29 cbee rose: > efse [a2 Te Pane 4 hos Sue, sucdy oman shaleipy 1k to ¢. 2 AWA wk WOR a sw oncnsnh Shake guy weds we @ woeotty Adntasnk shuot 5 Jenw, Hue in ro aQitilarowr In QO veto ily 007 Sick dontrank — ghaleger cet BAL NE we oblein Hue Tnedr reyiGuon : onlOlyying hath, W)19 ook a Ne. THO eeanbu tS t§ c anh it FS por ®, c) To we emuve bot (%4,4)- ®, Rok if = pays AS beak rexpOure CSade pe (OR) 18 Skid Nan equclncow a) Tae tilegy pofle oe To 19 90 WRNOUTR 4 eth ae potle be wl ke Sictty Ole a sauinhver Fo flog Bae eprUrrn cwaleyy, i2. Consider the following game in extensive form: . (0.2 points) identify the players’ set of strategies and represent the game in strategic form. a b. (0.2 points) Obtain the Nash equilibria in pure strategies of the game. ¢. (0.2 points) Obtain the subgame perfect Nash equilibrium of the game. d, (0.1 points) Explain why strategy s, = AC of player 2 contains an incredible threat. 4) BAW zy 82= 4A, ad, Be, By 2 Nac | an | ae [oo X 152] 350 [os | ot EH Ol eS gees ie z fax [au foe [or | gain en. we b) To oblin mak NE we akbin WL plouyus herk ref Bo im Ra adoring, Rat oedh eyiburen NE = KOC, CX, AOD, CBBC), (EBOOY c) To obein HO SPNE race Bed qfurd tu exleudive Jom rob’ palek Cagl dwsplale wfoudtran J, ue crappy Kat wectwosd —yacuchon, alwurh, Ac ARQLY, we Sisteatn ve ehoal Aa af 2004 flager in eney cledron node Bok ¢ plouyr hor 1 ploia. we oblevn SAVE = (x, 8D) Shalegy S) = Ac uiloen plone” 2 Cok Ko acdc 7 ayQonon ot ae eo he ocho tg ploy ¥). Howene), d vod 0 plouy eh Wak mfotvuciin 22k ho \ ieee py C,or wai Rkoral Aa th dD,3, Consider the following lobbying game between two firms, 1 and 2, which compete simultaneously forthe favor of the government. Let v = 150 be the value of the rents that the firm canlextract from the government fit HA) succeeds, Let c, € 0,100], with i € N= {1,2} be the contribution that each firm makes to the government. Si payoffs are such that if c > cj firm i gets the favor ofthe government and receives v. In this case, firm j receives 0. ; = cj, firm gets the favor ofthe government with probability, in which case firm i receives v (it receives O otherwise). The contributions of the firms to the government are sunk costs to the firm, in the sense that each firm has to pay them independently of whether the firms gets the favor of the government or not. Suppose that firms seek to maximize their profit (rents net of cost) and that they only use pure strategies. a. (0.1 points) identify the elements of the game in strategic form. b. (0.2 points) Obtain the players’ best responses and represent them. ¢. (0.2 points) Is there a Nash equilibrium of the game in pure strategies? Argue your answer, a) NagA2 Note Mat epvanraanh Ya 00k hough In Hae anne ) fie Wsk ib adn t ieee 4 dherricn 8 [oro] eikk aes, ioe). J iy cea Fe iy aec) Oe ‘} ce eey b) } \ 3100 2 ) C2100 PR(cp) = cae i €[aneo) Gre +} Geforce) Ap. QO DF Q=1 DTA) = 190 -1= 44 aisle gk F G,21004 T, (100 ,0) 2180 100 #50 =50 SIF ¢, -0 HT, 80) 20 th ca 1 471,01, H)> “10 fF q=S0 4 Th Cho,50)» SP -S0 = 25 Fe, 281 2h (51,80 )= 180 -S) = AF HE zSIe TE Bc, = 7049 T, (90,80) = 180-704 FO €y=100 aif ed HT (0,00)=0 DG"=0 (EG = wy T(GO1OO) = - A IRC, =100 wT, COO, td) = [$O-100 = -2S