1. Now suppose the two doctors play this game twice. Also, suppose each doctor c
ID: 1188125 • Letter: 1
Question
1. Now suppose the two doctors play this game twice. Also, suppose each doctor can play one of two strategies: it can play either “always charge the low price†or “tit for tatâ€â€” that is, it starts off charging the high price in the first period, and then in the second period it does whatever the other doctor did in the previous period. Write down the payoffs to Dr. Fine from the following four possibilities:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
a. Dr. Fine plays “always charge the low price†when Dr. Feelgood plays “tit for tat.â€
FIRST Period
Payoffs
SECOND Period
Payoffs
TOTAL Payoffs
Charges
(high or low)
Charges
(high or low)
Fine
Fine
Feelgood
Feelgood
FIRST Period
Payoffs
SECOND Period
Payoffs
TOTAL Payoffs
Charges
(high or low)
Charges
(high or low)
Fine
Fine
Feelgood
Feelgood
Explanation / Answer
a) Dr. Fine plays always charge the low price when Dr. Feel good also plays always charge the low price. Both Dr. Fine and Dr. Feel Good charge the low price in both periods, so the payoffs are $35 in the first period and $35 in the second period, for a total of $35 + $35 = $70 ========================================================================================================================================= b) Dr. Fine plays always charge the low price when Dr. Feel good plays tit for tat. [BU224 | Microeconomics] In the first period, Dr. Feel Good charges the low price and Dr. Fine charges the high price for a payoff to Dr. Feel Good of $45. In the second period, Dr. Feel Good and Dr. Fine both charge the low price for a payoff to Dr. Feel of Good $35. Dr. Feel Food payoffs are therefore $45 + $35 = $80 =============================================================================================================================================================================================== c) Dr. Fine plays tit for tat when Dr. Feel good plays always charge the low price. In the first period, Dr. Feel Good charges the high price and Dr. Fine charges the low price for a payoff to Dr. Feel Good of $0. In the second period, both Dr.s charge the low price for a payoff to Dr. Feel Good of $35. Dr. Feel Goods total payoff is therefore $0 + $35 = $35. =========================================================================================================================== = d) Dr. Fine plays tit for tat when Dr. Feel good also plays tit for tat. Both Dr.s charge the high price in both periods, so Dr. Feel Goods payoffs are $40 in both periods, for a total of $38 + $38 = $76
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.