1. Some games of strategy are cooperative. One example is deciding which side of
ID: 1254645 • Letter: 1
Question
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.
Explanation / Answer
1.In a cooperation game, Driver 2 will know what decision Driver 1 has made. Thus Player 1 will compare his two highest possible payoffs; 0 or 0 (since these are bigger than -1000 and -1000. In this case, since 0=0, player 1 is indifferent between left and right and has no dominant strategy. He can choose either and expect equal payoff.
Next, Player 2 will see what Player 1 has done. If player 1 chooses "right", player 2 will have a higher payoff from also choosing "right" since 0<(-1000). If player one chooses "left", player 2 will once again copy player 1 because the payoff is higher.
A nash equilibrium is a strategy in which neither player desires to deviate. In this case, there are two nash equilibriums at when both players cooperate and choose (right, right) or (left, left).
this is called a cooperative game because cooperation results in the highest payoffs for both players.
2. price equal to marginal cost,
quantity equal to demand at that price,
total cost is a function of that quantity
profits are price*quantity minus cost
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