Do you understand Nash Equilibrium from Economics?
This is probably asking too much but if... you enjoy simple economics, help a girl out.
http://dss.ucsd.edu/~jhamilto/econ2_prac...
Questions #4 and 5: The questions are asking what is the Nash equilibrium. I thought it'd be Mo getting 300 and Joe getting 200 because that's the most optimal for both. However the answers the Professor gave are: Mo gets 75 and Joe gets 150, for both questions 4 and 5. Do you understand why?
Thank you soooo much. My midterm is tomorrow, I am so screwed.
Answer:
Question 4:
If Mo chooses X=1, Joe will choose Y=1 because he is better off as he gets 225 which is greater than 200, and Mo will earn 25. If Mo chooses X=2, Joe chooses Y=1 because he rather have 150 than 125, and Mo gets 75. Since Mo knows this, he rather get 75 than 25, so he chooses X=2, and Joe in time, chooses Y=1.
Question 5:
Its hard to explain without drwing the payoff matrix, but if Mo know Joe will choose Y=1, Mo will choose X=2 because 75 is better than 25. Similarly if Mo knows Joe will choose X=2 since 300 is better than 125. Now we use the same reasoning to find that if Joe knows Mo will choose X=1, he rather choose Y=1 since 225 is better than 200, and if Joe knows Mo will choose X=2, Joe will choose Y=1 because 150 is better than 125.
Notice that Joe will always rathe choose Y=1. He has a dominant strategy at Y=1. Since Mo knows that Joe will always choose Y=1, he will choose X = 2, and the NE will be 75,150 again.
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http://dss.ucsd.edu/~jhamilto/econ2_prac...
Questions #4 and 5: The questions are asking what is the Nash equilibrium. I thought it'd be Mo getting 300 and Joe getting 200 because that's the most optimal for both. However the answers the Professor gave are: Mo gets 75 and Joe gets 150, for both questions 4 and 5. Do you understand why?
Thank you soooo much. My midterm is tomorrow, I am so screwed.
Answer:
Question 4:
If Mo chooses X=1, Joe will choose Y=1 because he is better off as he gets 225 which is greater than 200, and Mo will earn 25. If Mo chooses X=2, Joe chooses Y=1 because he rather have 150 than 125, and Mo gets 75. Since Mo knows this, he rather get 75 than 25, so he chooses X=2, and Joe in time, chooses Y=1.
Question 5:
Its hard to explain without drwing the payoff matrix, but if Mo know Joe will choose Y=1, Mo will choose X=2 because 75 is better than 25. Similarly if Mo knows Joe will choose X=2 since 300 is better than 125. Now we use the same reasoning to find that if Joe knows Mo will choose X=1, he rather choose Y=1 since 225 is better than 200, and if Joe knows Mo will choose X=2, Joe will choose Y=1 because 150 is better than 125.
Notice that Joe will always rathe choose Y=1. He has a dominant strategy at Y=1. Since Mo knows that Joe will always choose Y=1, he will choose X = 2, and the NE will be 75,150 again.
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