Question
Consider the game below, where players I and II can play either A or B. Player 1 (rows) / Player 2 (columns) A B A
Consider the game below, where players I and II can play either A or B.
Player 1 (rows) / Player 2 (columns) | A | B |
---|---|---|
A | a,a | c,d |
B | d,c | b,b |
(a) Write down the parameter restrictions necessary to make (A,A) a Nash equilibrium. How do those compare to the parameter restrictions necessary to make B a dominated strategy for each player? Which is more restrictive, and why does that make sense, intuitively.
(b) Write down the parameter restrictions necessary to make (B,B) a Nash equilibrium. Under what parameter values can both (A,A) and (B,B) be Nash? ]
(c) Assuming your parameter restrictions in (b) hold, what is the mixed strategy Nash equilibrium of the game, where each player plays A with probability and B with probability (1 )? [Because its a symmetric game, it will be easier to interpret if the probabilities are associated with the same strategy.]
(d) Explain how from part (c) responds to the parameter values a, b, c, d. Give some intuition, not just math.
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