Microeconomics: Theory and Applications with Calculus, 4e

Exercises

All exercises are available on MyEconLab; ${*}^{}=\text{answer}$ appears at the back of this book; $\mathbf{M}=\text{mathematical}$ problem.

1. Static Games 

1. *1.1 Show the payoff matrix and explain the reasoning in the prisoners’ dilemma example where Larry and Duncan, possible criminals, will get one year in prison if neither talks; if one talks, one goes free and the other gets five years; and if both talk, both get two years. (Note: The payoffs are negative because they represent years in jail, which is a bad.)

2. 1.2 Show that advertising is a dominant strategy for both firms in both panels of Table 13.3 . Explain why that set of strategies is a Nash equilibrium.

3. *1.3 Two firms must simultaneously decide which quality to manufacture. The profit matrix (in tens ...