Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following scenario. Three people A, B, C each decide simultaneously on a cafe to study at. There are two choices of cafes, Cafe

Consider the following scenario. Three people A, B, C each decide simultaneously on a cafe to study at. There are two choices of cafes, Cafe X and Cafe Y. The problem with this situation is that none of these people mutually like each other's company. A dislikes B, B dislikes C, and C dislikes A. On the other hand, A likes C, B likes A, and C likes B. After deciding on a cafe, each individual i obtains a utility consistent with these preferences. Everyone likes Cafe X better than Cafe Y, so choosing Cafe X yields each player an additional 1 unit of utility, while going to Cafe Y yields zero additional utility. Each individual i also obtains an additional 2 units of utility if the person that they like decides to study at the same cafe and obtains an additional k units of (dis)utility if the person they dislike chose to study at the same cafe. Being alone in a cafe yields no additional utility. For example, if A, B, C all decided to study at Cafe X, then A obtains 1 + 2 k = 3 k utils.

Part a: What are all of the rationalizable strategies of each player of this game if k = 4? What are all of the rationalizable strategies of each player of this game if k = 2?

Part b: If k = 4, what are all of the (pure strategy) Nash equilibria of this game? If k = 2, what are all of the (pure strategy) Nash equilibria of this game?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics Principles For A Changing World

Authors: Eric Chiang

4th Edition

1464186677, 978-1464186677

More Books

Students also viewed these Economics questions

Question

3. What values would you say are your core values?

Answered: 1 week ago