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The document discusses game theory concepts: 1) It asks about the pure strategy Nash equilibrium in a game and whether it is unique. The answer shows that solving the best response functions simultaneously yields a unique Nash equilibrium where both players choose 1. 2) It then asks what levels the players would choose if they could sign a binding agreement. The answer states that both players would be better off choosing not to spend any money on negative campaigns, as this would give each a payoff of zero rather than the Nash equilibrium payoff of -1. 3) This is described as a variant of the Prisoner's Dilemma game where cooperation yields better outcomes than defection even though defection is the dominant

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68 views1 page

Search For Courses, Books or Documents: Upload Download

The document discusses game theory concepts: 1) It asks about the pure strategy Nash equilibrium in a game and whether it is unique. The answer shows that solving the best response functions simultaneously yields a unique Nash equilibrium where both players choose 1. 2) It then asks what levels the players would choose if they could sign a binding agreement. The answer states that both players would be better off choosing not to spend any money on negative campaigns, as this would give each a payoff of zero rather than the Nash equilibrium payoff of -1. 3) This is described as a variant of the Prisoner's Dilemma game where cooperation yields better outcomes than defection even though defection is the dominant

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¥

(c) What is the pure strategy Nash equilibrium


equilibrium?
? is it unique?

Answ
Ans wer: Solving the two best response functions sim
simultaneously
ultaneously,,

1 + 2 1 + 1
1 = and 2 =
2 2
yields th
the
e Na
Nash
sh equilibrium 1 =  2 = 1, and this is th
the
e un
unique
ique solu
solution
tion
to these equation
equations
s implying that this is the unique equilibr
equilibrium.
ium. ¥

(d) If the parties could sign a binding agreem


agreemen
ent
t on ho
how
w much to camp
campaign,
aign,

what lev
eve
els would they cho
choose?
ose?

Answ
Ans wer: Bo
Both
th parties would be better off if they can cho
would hoose
ose not to
spend
sp end money on negativ
negative
e campaigns. The payoffs for each pla
payo player
yer from

the Nash equilibrium solved in part (c) are (1


(1 1) = −1 while of they
agreed not to sp
speend an
anything
ything they each woul
ouldd obtai
obtainn zero. This is a
variant of the Prisoners
Prisoners’’ Dilemma. ¥

15.
Help
16 H t lli ’ P i C titi I i ti f t ti l b

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