Strategy thinking

Dr. Vidya Atal Strategic Thinking & Game Theory

Module 7 Assignment

Answer all the questions. Remember that every part of the question has points assigned; by just submitting an answer to each part you can get 50% submission credit, but if you do not submit an answer to a part, you get 0. So play strategically! Please upload the images of your answers on Canvas before the due date.

1. Find out all the pure strategy Nash Equilibria and Subgame Perfect Nash Equilibria in each of the following games. Show your work. (20×2 = 40 points)

(a)

(b)

2. Firm 1 chooses an advertising level a ≥ 0 first, which influences the demand and hence the price in the competition stage. After selection of advertisement level, firms 1 and 2 compete as Cournot duopolists with demand: p = 60a − q1 − q2. Total cost of production is Cq = 0 and total cost of advertisement is Ca = 13a

3. Find out the Subgame Perfect Equilibrium of this game. Show your work. (20 points)

1