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QUESTION 1 (50 Points) Consider a completeinformation game where each player (also called agent) 'i E N : {1, 2, . . . , n}
QUESTION 1 (50 Points) Consider a completeinformation game where each player (also called agent) 'i E N : {1, 2, . . . , n} simultaneously selects a real-valued action a,- 2 0 and receives a real-valued payoff a, ((11,052, . . . , an) that depends on everyone's action. Suppose that each agent 72 's bestresponse function is given by 13R,1 (a_,-) : awaaj + be" (1) 3 Here a > 0, W : (1015):. jEN' and (bi-hen; are constantsparameters of the model that do not depend on a : ((1,) 2E N. The matrix W is irreducible, with W\"- : 0 for every 73, and all its entries are nonnegative. All the b,- are positive]L 1. The previous game represents strategic of complements or substitutes? (10 Points) 2. Characterize the unique equilibrium of the game. (10 Points) 3. How is your answer to question 2 related to the network topology? (10 Points) 4. Now, assume that or 0 and suppose that you want to measure the gap between a socially optimal outcome and the Nash equilibrium of the game. Could you provide a measure to quantify inefciency? (10 Points)
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