Econ 550

Topics: Game theory, Economics, Nash equilibrium Pages: 2 (489 words) Published: February 10, 2013
co 550 Assignment 3

Assignment 3

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.

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

I don’t believe that either player has a dominant strategy. Dominant strategy is “a strategy that results in the best outcome or highest payoff to a given player no matter what action or choice the other player makes” (Farnham, 2010, p. 233). If both drivers stay on their side of the road, they both pass each other safely. If one driver drives on the wrong side of the road, they both lose. If both drivers drive on the wrong side of the road, they will pass each other safely. So, in all scenarios, a given player will not have any dominant strategy.

b. Is there Nash equilibrium in this game? Explain.

I do believe that there is Nash equilibrium in this game. Nash equilibrium is “a set of strategies from which all players are choosing their best strategy, given the actions of the other players” (Farnham, 2010, p. 234). The driver will drive on the correct side of the road because this is their best strategy, assuming that the other driver is using their best strategy.

c. Why is this game called a cooperative game?

I believe that this game is a cooperative game because if one or both players don’t cooperate, then neither player wins. Cooperative oligopoly models are “interdependent oligopoly behavior that assume that firms explicitly or implicitly cooperate with each other to achieve outcomes that benefit all the firms” (Farnham, 2010, p. 490).


a. What is the firm’s Total Revenue?

The firm’s Total Revenue is where (A)(E)= (Total Revenue), This is the rectangle made by CAJG. “Total revenue is represented as a rectangle with Price (on the demand curve) as its height, and quantity (determined by MR=MC) as its width”...
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