1. For each of the following payoff matrices. determine
(i) whether Finn I or Firm 2 (or both) has a dominant strategy; and
(ii) the type of equilibrium that will result (dominant strategy equilibrium, Nash equilibrium, or none).
Be sure also to explain whether an equilibrium. if it exists, is also unique.
(a) Firm 2 (b) Firm 2
A B C A B
Firm A 10,2 12,4 13,3 Firm A -2,-2 2, 4
1 B 17,5 8,7 14,4 1 B -3, 3 -3, 5
C 9,7 11,8 10,6 C 4, 2 -2,-2
2. Write the game in part 1(a) in extensive form, and explain the outcome:
(a) IC Firm I moves first;
(b) If Finn 2 moves rust
3. LL Bean and Eddie Bauer dominate the market for a specific type of women's parka, and each has studied the other's pricing decisions. They are in basic agreement about their respective revenues when they adopt prices of $100 and S150 for the parka, and the numbers for monthly revenues in $millions, are
Eddie Bauer
$100 $150
LL Bean $100 42,28 34,23
$150 20,33 52,46
(a) What is the maximin equilibrium?
(b) What is the mixed strategy equilibrium?
4. Explain the pure strategy equilibrium concepts (Nash, IllilXiMill, and dominant strategy) and the mixed strategy equilibrium concept.
5. What is meant by "fast mover advantage"?
6. Explain briefly
(a) what English. Dutch, and sealed bid auctions are:
(b) why the bidding strategies for English and 2' price sealed bid auctions differ from those for Dutch and 1" price sealed bid auctions.