AutoSave O off H . Game theory questions-1 - Protected. . Saved to this PC Search File Home Insert Page Layout Formulas Data Review View Automate Help PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing E9 VIXfx B D E F G H Payoff Matrix Palace's Price W N High Low Castle's Price High $1000, $900 $450, $2000 Low $1800, $300 $500, $400 7 Part A: (30 points) 8 Treating this as a one-shot simultaneous game, 9 1. Find dominant strategy for each player. 10 2. Find a secure strategy for each player. 11 3. Find Nash equilibrium 12 4. What is the payoff for each player at Nash equilibrium? 5 points 13 14 Part B: (60 points) 15 Do you think cooperation works in this case? If "No", explain why. If "Yes," answer the following questions. 16 a. What is the cooperation strategy? 17 b. If the interest rate is 7.25%, what strategy would be better for each firm? Should they choose to cooperate or cheat? How much will each player earn for both cheating and cooperation? 18 c. For what range of interest rates could these firms use trigger strategies to support the collusive level of pricing? 19 d. Assuming the probability of ending this price game is 2%, what is the optimal strategy for the firms: cheating or cooperation? What if the probability of ending the game is 90%? 20 21 22 Part C: (30 points) 23 Consider a two-player, sequential-move game where each player can choose to charge a high or low price. Palace moves first 24 a. Draw the sequential-move game payoff diagram. You can draw this in a Word file and use the screenshot here. 25 b. Is there any credible threat from Castle? If yes, what's that threat? 26 c. Find the subgame-perfect equilibrium and the payoff. 27 28 29 Rules: 30 31 1) You can't conv answers from another student. No submission should be identical. Everybody has a distinct style. The use of another student's answer is considered cheating. Any evidence of copvi Final Project Bonus Question Ready 23 51"F Sunny Q Search insert prt ser O % 5 O W R O A S D G H K B N M