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    Final Exam May 2022

    Uploaded by

    Sheikh Sahil Mobin
    This document provides instructions for a 90 minute exam on game theory consisting of 7 questions worth 60 total marks. Question 1 involves bargaining between two players over splitting a prize and calculating a subgame perfect equilibrium. Question 2 presents a game theory scenario involving 5 Earls arriving at a King's palace over 5 days and determining the King on the 6th day. Question 3 covers a Cournot duopoly model and calculating quantities and prices. Question 4 presents an incomplete information game and finding pure strategy Bayes Nash equilibria. Question 5 provides a game matrix and conditions for a strategy to be subgame perfect. Questions 6 and 7 involve additional auction and game scenarios to solve.

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    Final Exam May 2022

    Uploaded by

    Sheikh Sahil Mobin
    31 views3 pages
    This document provides instructions for a 90 minute exam on game theory consisting of 7 questions worth 60 total marks. Question 1 involves bargaining between two players over splitting a prize and calculating a subgame perfect equilibrium. Question 2 presents a game theory scenario involving 5 Earls arriving at a King's palace over 5 days and determining the King on the 6th day. Question 3 covers a Cournot duopoly model and calculating quantities and prices. Question 4 presents an incomplete information game and finding pure strategy Bayes Nash equilibria. Question 5 provides a game matrix and conditions for a strategy to be subgame perfect. Questions 6 and 7 involve additional auction and game scenarios to solve.

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    This document provides instructions for a 90 minute exam on game theory consisting of 7 questions worth 60 total marks. Question 1 involves bargaining between two players over splitting a prize and calculating a subgame perfect equilibrium. Question 2 presents a game theory scenario involving 5 Earls arriving at a King's palace over 5 days and determining the King on the 6th day. Question 3 covers a Cournot duopoly model and calculating quantities and prices. Question 4 presents an incomplete information game and finding pure strategy Bayes Nash equilibria. Question 5 provides a game matrix and conditions for a strategy to be subgame perfect. Questions 6 and 7 involve additional auction and game scenarios to solve.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    31 views3 pages

    Final Exam May 2022

    Uploaded by

    Sheikh Sahil Mobin
    This document provides instructions for a 90 minute exam on game theory consisting of 7 questions worth 60 total marks. Question 1 involves bargaining between two players over splitting a prize and calculating a subgame perfect equilibrium. Question 2 presents a game theory scenario involving 5 Earls arriving at a King's palace over 5 days and determining the King on the 6th day. Question 3 covers a Cournot duopoly model and calculating quantities and prices. Question 4 presents an incomplete information game and finding pure strategy Bayes Nash equilibria. Question 5 provides a game matrix and conditions for a strategy to be subgame perfect. Questions 6 and 7 involve additional auction and game scenarios to solve.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Introduction to Game Theory

    Time Allowed: 90 minutes


    Start 12:00 End 1:30pm
    Total Questions : 7 Total Marks: 60

    Question 1 (10 marks)


    Players 1 and 2 are bargaining over how to split a prize of size 100. In time period 1, player 1
    proposes a share of the prize x to player 2 and player 2 may accept or reject his offer. If he
    accepts, the game ends with the proposed distribution by player 1 i.e., payoffs (100-x, x). If
    player 2 rejects, the game moves to the second time period, in which the size of the prize
    becomes half due to some external punishment. In the second time period, player 2 proposes a
    share y to player 1 and player 1 can either accept, resulting in payoffs y to player 1 and the
    remainder to player 2. In case player 1 rejects then the game moves to round 3. In round 3, the
    prize shrinks to 1/4th of the original size and each player gets the prize randomly with a
    probability of half by flipping a coin and the game finishes.
    Solve for a subgame perfect equilibrium to this game.

    Question 2 (10 marks)


    The five Earls of the West are scheduled to arrive at the King’s Palace on each of the first five
    days of July. They have been called upon to settle some uprisings in the Kingdom. The first Earl
    will arrive on the first of July, the second will arrive on the 2nd of July and so on. Each Earl, upon
    arrival, can either kill the king or support the king. If he kills the king, he takes the king’s place,
    becomes the new king, and awaits the next Earl’s arrival. If he supports the king, all subsequent
    Earl’s cancel their visits. An Earl’s first priority is to remain alive, and his second priority is to
    become king.
    i. Draw a tree diagram to represent this information.
    ii. How many subgames are there?
    iii. Who is the King on the 6th day of July?
    Question 3(10 marks)
    Two firms are competing in an industry via the Cournot duopoly model. The following
    information is available on the two firms.
    The industry demand curve is given by: P= 120- Q
    Total Cost for Firm 1: 30Q1
    Total Cost for Firm 2: Q22
    a. Write down each firm’s Reaction Function
    b. Calculate the quantity produced by each firm and the market price.
    c. Suppose instead the firms operate according to the Stackelberg model. Firm 1 is the
    Leader firm. Calculate the quantity produced by the leader firm.
    Question 4 (10 marks)
    John and Sara play the following game of incomplete information. Nature selects the type X of
    player 1 where X= 2 with a probability 2/3 and X=0 with a probability of 1/3. Player 1 observes
    X i.e. he knows his type but player 2 does not. The players then make simultaneous and
    independent choices as represented by the following matrix:
    John/Sara C D
    A 0,1 1,0
    B 1,0 X,1

    Solve for all pure strategy Bayes Nash equilibria. [ 10 marks]

    Question5 (10 marks)


    Consider the following game between two firms. Both are considering moving into the market
    with an advertising strategy or stay out of the advertising strategy. The game is modeled as an
    infinitely repeated game and each firm has to decide on its actions in every period.
    Additionally, the firms follow a tit for tat strategy which is as follows:
    Strategy: Start with In, and then do whatever you opponent did in the last round.

    Payoffs are depicted in the matrix below.

    1\2 In Out
    In 3,3 0,4
    Ou 4,0 2,2
    t

    Find the conditions on the discount factor(delta) for the strategy to be subgame perfect.

    [10 marks]

    Question 6 (5 marks)

    Consider the first price sealed bid auction with two players having valuations v1 and v2 where,
    v1 > v2 , and all other assumptions the same as discussed in class. i.e. in case of a tie the object is
    awarded to the player with the highest valuation Except The ONLY difference now is that the
    loser also pays his own price and receives nothing in return.
    Solve for a pure strategy Nash to this modified auction scenario if any. Explain. [ 5 marks]

    Question 7 (5 marks)

    1/2 A B C
    A 0,0 0,2 0,4
    B 2,0 -1,-1 -1,1
    C 4,0 1,-1 -2,-2

    i. Solve for a mixed strategy Nash equilibrium. Show your working.

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