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Cooperative Games and Total Revenue

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1. Some games of strategy are cooperative. One example is deciding which side of the road to drive on. If doesn't matter which side it is as long as everyone chooses the same side. Otherwise, everyone may get hurt.
a. Does either player have a dominant strategy? Explain.
b. Is there a Nash equilibrium in the game? Explain.
c. Why is this game called a cooperative game?

2. See the attached problem with the firm's average total cost curve, marginal cost curve, demand and marginal revenue curve shown.
a. What is the firm's Total Revenue?
b. What is the Total Cost?
c. What is the firm's Total Profits?
d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.

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QUESTION 1

a. Does either player have a dominant strategy? Explain.

No. Because a dominant strategy implies that for a player, one strategy (either left or right) is better regardless of what the other player does. In this case, for player 1, the best strategy is to do left if player 2 does left and right if player 2 does right. The same goes for player 2, who wants to end up with the same strategy as player 1.

b. Is there Nash ...

Solution Summary

This solution looks at types of strategies and determining the area of the graph for total profit etc.

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Nash Equilibrium and Pareto Efficiency in Game Theory

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.

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