Game Theory Homework

• Do some online research and reading about real life examples of non zero-sum games. Write a report with at least 200 words and must include the following:
  1. Two examples of real life non zero-sum games.
  2. An explanation of why the examples are non zero-sum.

Imagine that you are not well prepared for an exam, and you think you might fail it. If you miss the exam, you will certainly fail it. What is your dominant strategy: attend or miss? Why?

Question 1

Juan and Elsa are two of ten players who are participating in a reality TV show that makes players engage in a series of challenges. If a player loses that challenge they are sent home and lose the opportunity for the grand prize. In previous episodes, they have each won a medallion that gives the holder immunity from a challenge that sends them home. However, a player must decide to use it before the challenge starts.

Juan and Elsa have both won immunity medallions and are now facing each other in a challenge that may send one of them home, or someone else could lose the challenge and be sent home. They can use their immunity now or save it for later.

The payoffs to their strategies are given in the payoff matrix shown below. The first entry represents Elsa’s payoff and the second entry represents Juan’s payoff.

How many Nash equilibria exist for this game?

Question 2

Charlie’s Cappuccinos, Melia’s Mocha, and Jared’s Java have agreed to collude and act like a monopoly by setting a price of £5 per cup of coffee.

What is the most likely outcome? (Choose one option below)

1. At least one firm will violate the agreement and raise its price
2. At least one firm will exit the industry
3. Industry profits will be higher in the long run
4. At least one firm will violate the agreement and lower its price
5. Industry profits will stay the same in the long run