Eco 550 Assignment 3 Game Strategy

1. Some games of strategy are cooperative. One example is deciding which side of the road to drive on. It doesnt matter which side it is as long as everyone chooses the same side. Otherwise, everyone may get hurt. Driver 2 Left Right Driver 1 Left 0, 0 -1000 -1000 Right -1000, -1000 0, 0 Does either player have a dominant strategy Explain. Solution - No player has a dominant strategy in this game. They have the same payout for both left and right Is there Nash equilibrium in this game Explain Solution- There are Two Nash equilibrium - Left-Left and Right-Right. At these points none of the players can maximize their payout by changing strategies. Why this game is called a cooperative game Solution- This game can we call a cooperative game because both parties need to decide if they want to go left or right. They need to cooperate with each other because if they do not, both of them end up getting hurt Question 2 a. What is the firms Total Revenue Solution- Computation of the Total Revenue Area A monopolist sets its output such that MRMC to maximize its profits. MC and MR intersect each other