(b) the game also has a mixed strategy nash equilibrium., Ask an Expert

Economics

Countries A and B are engaged in a high stakes game of chicken. Both have two pure strategies: act tough or back down. They will make their decisions simultaneously. The payoffs are

B
Back Down Act Tough
A Back Down 0,0 -1, k
Act Tough k, -1 -10, -10

where k > 0 is the payoff from acting tough when your opponent backs down.

(a) Show that this game has two pure strategy Nash equilibria.

(b) The game also has a mixed strategy Nash equilibrium. Find the equilibrium probability that each country will act tough as a function of k.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9694019

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