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LO 9 W S V FRA 6:16 PM AutoSave O Off Problem set 2 (3).docx - Saved to this PC O Search janyl sagynbaeva JS X File Home Insert Draw Design Layout References Mailings Review View Help IS Share Comments Exercice 2 : Find all pure-strategy Nash equilibria for the following game. Describe the process that you used to find the equilibria. Use this game to explain why it is important to describe an equilibrium by using the strategies employed by the players, not merely the payoffs received in equilibrium. COLIN Left Center Right Up 1,2 2, 1 1,0 ROWENA Leve 0, 5 1, 2 7,4 Down -1, 1 3.C 5,2 Exercice 3 : The Widget market is currently monopolyzed by Widgets, but another firm (Wadgets) is deciding whether to enter the market. If Wadgets stays out of the market, Widgets will earn 100$ million profit. However, if Wadgets enters, Widgets can either share the market, in which case the two companies enjoy a total of 205 million in profit, or wage a ruinous price war, in which case both companies lose big and go bankrupt (0$ profit). The only sane choice for Widgets is to share the market, but before Wadgets chooses whether to enter, the Widgets board of directors has the opportunity to hire a new CEO, and this new CEO might just be crazy enough to wage a price war ! (a) Draw the game table for this game, where the relevant players are Wadgets, which decides whether to enter the market, and the Widgets Board, which decides whether to hire a crazy CEO who will wage a price war if Wadgets enters or hire a sane CEO who will share the market of Wadgets enters. (Assume that Wadgets has no way of | knowing if the newly hired Widgets CEO is crazy or sane, making this a simultaneous-move game). (b) In this game, the Widgets board views hire a sane CEO as a strategy. Fill in the blank with one of the following answers : , , weakly dominant (but not strictly dominant) > or >. Explain your answer. (c) Find all pure-strategy Nash equilibria in this game. (d) Suppose that, in addition to wanting to maximize profits and avoid bankruptcy, the Widgets board would prefer not to have a crazy CEO. How does this extra consideration change your answer in part (b), and how does it change the set of pure- strategy Nash equilibria relative to part (c) ? explain your answers. Page 2 of 3 660 words [ English (United States) Display Settings Focus + 62%