Part 1 Equilibrium Selection Consider the following version of the example in section 2 of Kandori et a1 {1993]. "Learn- tag, mutation, and tong run equitibr'io in games" with students meeting in pairs every period to work together with each using one of two computer systems, .31 or 52. There are 9 students in the group and the payor matrix is 81 32 51 3,3 0,0 32 0,0 1.1 During each period every student meets every other student once and at the end of each period: students observe the average payo's from having each computer system. Those who have the system doing worse on average change their systems for the next period. Also at the beginning of each period, before meetings begin, each member of the group exits [mututcs] with a probability 5 and is replaced by a student who has computer System 31 with probability in and 52 with probability (1 m). The meetings then take place with no opportunity to change computer systems during the period. Let z represent the state of the system which is the number of the nine students with computer system 31 and 7rd,?) the average payo' of a student with computer system s:- when the state is z. (a) What are the three Nash equilibria of this game? (b) Work out the values of z for which the system moves to coordination on .51 and for which it move to coordination on 32 (check this with average payoff calculations). Illustrate the basins of attraction on a line and indicate how many mutations are required to escape from each equilibrium. (c) Give the intuition for why coordination on 31 is more likely in the long run when the mutation rate is sufciently small and how this result is independent of or so long as m > 0. (d) Briey discuss how the approach in this paper is an improvement on other ways of addressing the equilibrium selection probiein and also comment on any limitations