Purchase Solution

Nash Equilibrium and Pareto Efficiency in Game Theory

Not what you're looking for?

Ask Custom Question

1. Some games of strategy are cooperative. One example is deciding which side of the road to drive on. It doesn't 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

a. Does either player have a dominant strategy? Explain.
b. Is there Nash equilibrium in this game? Explain
c. Why this game is called a cooperative game?

2. Explain the following

a. What is a firm's Total Revenue?
b. What is a firm's Total Cost?
c. What is a firm's Total Profits?
d. If a monopolist were to behave like a perfectly competitive firm (operating in the long run), discuss the effect.

Purchase this Solution
Solution Summary

(Part 1) In order for a cooperative game strategy to yield a desirable outcome, the actions of all players must take precedence over individual choice in the game. For example, when determining which side of the road to drive on, it is important to account for what other drivers will choose when making the decision (rather than simply choosing by personal preference). For two drivers making this decision, there are several pareto efficient outcomes to consider.

(Part 2) If a monopolistic firm begins to act like a perfectly competitive firm, this will change the cost, revenue, and profit structures of the firm.

Solution Preview

1. Some games of strategy are cooperative. One example is deciding which side of the road to drive on. It doesn't 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

a. Does either player have a dominant strategy? Explain.
b. Is there Nash equilibrium in this game? Explain
c. Why this game is called a cooperative ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Game Theory to Determine Form Representation

    Consider the following extensive game. a) Construct the normal form representation of this game and find all pure strategy Nash equilibria (10 points). b) Which of the pure Nash equilibria is sequentially rational (Perfect Bayesian Equilibrium)?

  • Define monopolistic competition and oligopolies.

    The Nash equilibrium for this type of game does not lead to Pareto optimums (jointly optimum solutions). In equilibrium, each prisoner chooses to defect even though the joint payoff would be higher by cooperating.

  • Rock, Paper, Scissors and game theory

    The solution discusses the Rock, Paper, Scissors and Game Theory.

  • pure strategy Nash equilibrium

    272928 Game Theory - Normal Form and Nash Equilibriums for Simultaneous Games You have been offered the chance to participate in a Treasure Hunt game whose rules are as follows. THere are three coloured boxes: red, green and yellow.

  • John Nash's Game Theory

    In this game the best strategy wasn't the Nash equilibrium, but it wasn't so far away from it either. John Nash's paper on game theory is summarized in the solution with details.

  • Game theory, Nash equilibrium, and prisoner's dilemma

    Game theory applied to Intel and AMD; determination of Nash equilibrium and presence of Prisoner's Dilemma.

  • Game Theory - Strategy

    Does there exist any Nash Equilibrium in this game? If so, what is it? If not, why not? Nash Equilibrium does exist and it will be "First (ABC)/Second(NBC)".

  • Nash Equilibrium: Coke & Pepsi Ad War

    This solution shows how to use game theory and Nash equilibria to predict whether Coke and Pepsi will continue their advertising war or reduce their advertising budgets.

  • Game Theory: Finding Dominant Strategy and Nash Equilibrium

    c) A Nash equilibrium exists in any cell in which both players' outcomes are circled. In this game, the two Nash equilibria are in the top left and bottom right corners.

View More Related Solutions