PSC/ 288 Game Theory

PSC/ECO 288 Game Theory

Prof. Tasos Kalandrakis Spring 2015

Assignment #8: Due in class Wednesday, April 22

Please write clearly and make sure to justify all your answers.

1. (25 points total) Find a WSE in the following dynamic game of incomplete information.

Nature

S W

1 1

1/2 1/4

U D

2

L R

(2, 0) h4

(3, 0) (5, 2)

U D

2

L R

(2, 0) h5

(1, 3) (4, 0)

U D

2

L R

(2, 0)

h6

(1, 5) (0, 0)

1

M 1/4

h1 h2 h3

I1

(a) (7 points) Report a behavioral strategy for players moving at h1,h2,h3, and I1.

(b) (8 points) Derive and report equilibrium beliefs µ(h4),µ(h5),µ(h6) for player 2 at I1.

(c) (10 points) Verify that sequential rationality is satisfied at all information sets h1,h2,h3 and I1.

1