Reference no: EM133341785
Question: In a one-shot game, if you advertise and your rival advertises, you will each earn $5 million in profits. If neither of you advertises, your rival will make $4 million, and you will make $2 million. If you advertise and your rival does not, you will make $10 million, and your rival will make $3 million. If your rival advertises and you do not, you will make $1 million, and your rival will make $3 million.
a.) Write the above game in normal form.
|
Your Rival |
| |
|
Advertise |
Do not Advertise |
| You |
Advertise |
|
|
| Do not Advertise |
|
|
b.) Do you have a dominant strategy? If so, what is it?
c.) Does your rival have a dominant strategy? If so, what is it?
d.) What is the Nash equilibrium for an infinite game?
e.) How much would you be willing to bribe your rival not to advertise (assuming bribery were legal, or at least that you would not be caught)? Specify the reasonable range and your "break-even" offer (the amount where both you and your rival receive the same total surplus over both advertising).
f.) What is the minimal amount your rival might be willing to accept?
g.) Given your answers to e) and f), do you expect that bribery would be a successful strategy, assuming legality?