Some games of strategy are cooperative. One example is deciding which side of the road to drive on. It doesn’t matter which side it is as long as everyone chooses the same side. Otherwise, everyone may get hurt.
Driver 2
Left Right
Driver 1 Left 0,0 -1000 -1000
Right -1000, -1000 0,0
a. Does either player have a dominant strategy? Explain.
b. Is there Nash equilibrium in this game? Explain
c. Why this game is called a cooperative game?
2.
a. What is the firm’s Total Revenue?
b. What is the Total Cost?
c. What is the firm’s Total Profits?
d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.
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1. Some games of strategy are cooperative. One example is deciding which side of the road to drive on. It doesn’t matter which side it is as long as everyone chooses the same side. Otherwise, everyone may get hurt.
Driver 2
Left Right
Driver 1 Left 0,0 -1000 -1000
Right -1000, -1000 0,0
a. Does either player have a dominant strategy? Explain.
b. Is there Nash equilibrium in this game? Explain
c. Why this game is called a cooperative game?
2.
a. What is the firm’s Total Revenue?
b. What is the Total Cost?
c. What is the firm’s Total Profits?
d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.
2 answers
a. Does either player have a dominant strategy? Explain. There is no choice that either player will always have a higher payoff regardless of what the other player does.
b. Is there Nash equilibrium in this game? Explain
According to the information provided I am assuming that both players know the strategy of each other, so my answer would be yes there is a Nash Equilibrium in this game. If the player prefer not to switch their strategy this is definitely consider Nash equilibrium which are (left, left) or payoff (0, 0) for players one or two. Also assuming each player knows the strategies of the other, then yes, there is no benefit to changing a strategy unilaterally.
c. Why this game is called a cooperative game? Because in this game both players should be cooperative to ensure maximum payoff because, both adopting strategy A, to the highest payoff (say left, left) also players can earn higher payoffs if they work together and drive on the same side of the road.
2.
a. What is the firm’s Total Revenue? Produce were MR=MC, and charge price based on demand. So, total revenue is area A J E 0 (or A * E)
b. What is the Total Cost? Total costs are shown by area B H E 0 (or B * E)
c. What is the firm’s Total Profits? Total profits are area A J H B (or A-B * E)
d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.
In perfect competition the firm would produce where P = MC, so point N above
b. Is there Nash equilibrium in this game? Explain
According to the information provided I am assuming that both players know the strategy of each other, so my answer would be yes there is a Nash Equilibrium in this game. If the player prefer not to switch their strategy this is definitely consider Nash equilibrium which are (left, left) or payoff (0, 0) for players one or two. Also assuming each player knows the strategies of the other, then yes, there is no benefit to changing a strategy unilaterally.
c. Why this game is called a cooperative game? Because in this game both players should be cooperative to ensure maximum payoff because, both adopting strategy A, to the highest payoff (say left, left) also players can earn higher payoffs if they work together and drive on the same side of the road.
2.
a. What is the firm’s Total Revenue? Produce were MR=MC, and charge price based on demand. So, total revenue is area A J E 0 (or A * E)
b. What is the Total Cost? Total costs are shown by area B H E 0 (or B * E)
c. What is the firm’s Total Profits? Total profits are area A J H B (or A-B * E)
d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.
In perfect competition the firm would produce where P = MC, so point N above