Chapter 10 Chapter Exercise Assignment 1. Suppose that the editors of Time and Newsweek are trying to decide upon their cover story for the week. There were two major news developments: The leaking of a clandestine CIA officer's identify and a terrorist suicide bombing.It is important that the news weeklies not choose the same cover story since some readers will by only one magazine when they might otherwise buy both. The choice of cover story depends on newsstand sales. The editors believe that 20 percent of newsstand buyers are interested in the CIA story, while 80 percent are interested in the terrorist bombing. If both news weeklies run the same cover story, they will evenly share the market, but if they run different cover stories, each will get that share of the market. This static game is depicted in the following figure. Payoff Matrix: (row, column)=(Time, Newsweek) CIA Terrorism CIA (10,10) (20,80) Terrorism (80, 20) (40,40) a. Does either news weekly have a dominant strategy? b. What is the Nash Equilibrium strategy profile for this game? 2. Determine the pure-strategy Nash Equilibrium for the following static game. Payoff Matrix Payoffs: (row, column) = (Rose, Gold) Left Left Center Right (5,4) (6,1) (7,3) Center (3,2) (8,5) (4,7) Right (10,7) (1,9) (4,1) 3. Consider the competitive, static, one-time game depicted in the following figure. a. If larger payoffs are preferred, does either player have a dominant strategy? b. c. d. e. f. g. h. If B believes that A will move A1, how should B move? If B believes that A will move A2, how should B move? What is the Nash equilibrium strategy profile if this game is played just once? What is the strategy profile for this game if both players adopt a secure strategy? What strategy profile results in the best payoff for both players? Is cooperation a Nash equilibrium if this game is played three times? If Player A can move first, can Player A's outcome be improved? Use a decision tree to determine the answer. Payoff Matrix: (row, column)=(A, B) B1 B2 A1 (20,20 (5,25) A2 (25,5) (2,2)