Strategy and Game Theory: Practice Exercises with Answers (Springer Texts in Business and Economics)

Preface
	Organization of the Book
	Changes in the Second Edition
	How to Use This Textbook
	Acknowledgements
Contents
1 Dominance Solvable Games
	Introduction
	Exercise 1—From Extensive Form to Normal Form Representation-IA
	Exercise 2—From Extensive Form to Normal Form Representation-IIA
	Exercise 3—From Extensive Form to Normal Form Representation-IIIB
	Exercise 4—Representing Games in Its Extensive FormA
	Exercise 5—Prisoners’ Dilemma GameA
	Exercise 6—Dominance Solvable GamesA
	Exercise 7—Applying IDSDS (Iterated Deletion of Strictly Dominated Strategies)A
	Exercise 8—Applying IDSDS When Players Have Five Available StrategiesA
	Exercise 9—Applying IDSDS in the Battle of the Sexes GameA
	Exercise 10—Applying IDSDS in Two Common GamesA
	Exercise 11—Applying IDSDS in Three-Player GamesB
	Exercise 12—IDSDS and RationalityA
	Exercise 13—Iterated Deletion of Strictly Dominated Strategies (IDSDS)A
	Exercise 14—Unemployment BenefitsA
	Exercise 15—Finding Dominant Strategies in Games with I ≥ 2 Players and with Continuous Strategy SpacesB
	Exercise 16—Equilibrium Predictions from IDSDS Versus IDWDSB
	Exercise 17—Different Equilibrium Predictions from IDSDS and IDWDSA
2 Pure Strategy Nash Equilibrium and Simultaneous-Move Games with Complete Information
	Introduction
	Exercise 1—Prisoner’s DilemmaA
	Exercise 2—Battle of the SexesA
	Exercise 3—Pareto Coordination GameA
	Exercise 4—Finding Nash Equilibria in the Unemployment Benefits GameA
	Exercise 5—Hawk-Dove GameA
	Exercise 6—Generalized Hawk-Dove GameA
	Exercise 7—Cournot Game of Quantity CompetitionA
	Exercise 8—Games with Positive ExternalitiesB
	Exercise 9—Traveler’s DilemmaB
	Exercise 10—Nash Equilibria with Three PlayersB
	Exercise 11—Simultaneous-Move Games with n ≥ 2 PlayersB
	Exercise 12—Political Competition (Hoteling Model)B
	Exercise 13—TournamentsB
	Exercise 14—Lobbying GameA
	Exercise 15—Incentives and PunishmentB
	Exercise 16—Cournot Competition with Efficiency ChangesA
	Exercise 17—Cournot Mergers with Efficiency GainsB
3 Mixed Strategies, Strictly Competitive Games, and Correlated Equilibria
	Introduction
	Exercise 1—Game of ChickenA
	Exercise 2—Lobbying GameA
	Exercise 3—A Variation of the Lobbying GameB
	Exercise 4—Finding a Mixed Strategy Nash Equilibrium in the Unemployment Benefits GameA
	Exercise 5—Newlyweds Buying an Apartment GameA
	Exercise 6—Finding Mixed Strategies in the Hawk-Dove GameB
	Exercise 7—Finding Mixed Strategies in the Generalized Hawk-Dove GameB
	Exercise 8—Mixed Strategy Equilibrium with N  greaterthan  2 PlayersB
	Exercise 9—Randomizing Over Three Available ActionsB
	Exercise 10—Rock-Paper-Scissors GameB
	Exercise 11—Penalty Kicks GameB
	Exercise 12—Pareto Coordination GameB
	Exercise 13—Mixing Strategies in a Bargaining GameC
	Exercise 14—Depicting the Convex Hull of Nash Equilibrium PayoffsC
	Exercise 15— Correlated EquilibriumC
	Exercise 16—Relationship Between Nash and Correlated Equilibrium PayoffsC
	Exercise 17—Identifying Strictly Competitive GamesA
	Exercise 18—Maxmin StrategiesC
4 Sequential-Move Games with Complete Information
	Introduction
	Exercise 1—Ultimatum Bargaining GameB
	Exercise 2—Entry-Predation GameA
	Exercise 3—Sequential Version of the Prisoner’s Dilemma GameA
	Exercise 4—Sequential Version of the Battle of the Sexes GameA
	Exercise 5—Sequential Version of the Pareto Coordination GameA
	Exercise 6—Sequential Version of the Chicken GameA
	Exercise 7—Electoral CompetitionA
	Exercise 8—Electoral Competition with a TwistA
	Exercise 9—Centipede GameA
	Exercise 10—Trust and Reciprocity (Gift-Exchange Game)B
	Exercise 11—Stackelberg with Two FirmsA
	Exercise 12—Stackelberg Competition with 2, or 3 FirmsB
	Exercise 13—Stackelberg Competition with Efficiency ChangesB
	Exercise 14—First- and Second-Mover Advantage in Product DifferentiationB
	Exercise 15—Stackelberg Game with Three Firms Acting SequentiallyA
	Exercise 16—Two-Period Bilateral Bargaining GameA
	Exercise 17—Alternating Bargaining with a TwistB
	Exercise 18—Backward Induction in Wage NegotiationsA
	Exercise 19—Backward Induction-IB
	Exercise 20—Backward Induction-IIB
	Exercise 21—Moral Hazard in the WorkplaceB
5 Applications to Industrial Organization
	Introduction
	Exercise 1—Bertrand Model of Price CompetitionA
	Exercise 2—Bertrand Competition with Asymmetric CostsB
	Exercise 3—Duopoly Game with A Public FirmB
	Exercise 4—Cartel with Firms Competing a la Cournot—Unsustainable in a One-Shot gameA
	Exercise 5—Cartel with firms competing a la Bertrand—Unsustainable in a one-shot gameA
	Exercise 6—Cournot Competition with Asymmetric CostsA
	Exercise 7—Cournot Competition and Cost DisadvantagesA
	Exercise 8—Cartel with Two Asymmetric FirmsA
	Exercise 9—Strategic Advertising and Product DifferentiationC
	Exercise 10—Cournot Oligopoly with CES DemandB
	Exercise 11—Commitment in Prices or Quantities?B
	Exercise 12—Fixed Investment as a Pre-commitment StrategyB
	Exercise 13—Socially Excessive Entry in an IndustryB
	Exercise 14—Entry Deterring InvestmentB
	Exercise 15—Direct Sales or Using A Retailer?C
	Exercise 16—Profitable and Unprofitable MergersA
6 Repeated Games and Correlated Equilibria
	Introduction
	Exercise 1—Infinitely Repeated Prisoner’s Dilemma GameA
	Exercise 2—Collusion When Firms Compete in QuantitiesA
	Exercise 3—Temporary Punishments from DeviationB
	Exercise 4—Collusion When N Firms Compete in QuantitiesB
	Exercise 5—Collusion When N Firms Compete in PricesC
	Exercise 6—Collusion in Donations in an Infinitely Repeated Public Good GameB
	Exercise 7—Repeated Games with Three Available Strategies to Each Player in the Stage GameA
	Exercise 8—Infinite-Horizon Bargaining Game Between Three PlayersC
	Exercise 9—Representing Feasible, Individually Rational PayoffsC
	Exercise 10—Collusion and Imperfect MonitoringC
7 Simultaneous-Move Games with Incomplete Information
	Introduction
	Exercise 1—A Simple Bayesian Game
	Exercise 2—Simple Poker GameA
	Exercise 3—Incomplete Information Game, Allowing for More General ParametersB
	Exercise 4—More Information Might HurtB
	Exercise 5—Incomplete Information in Duopoly MarketsA
	Exercise 6—Public Good Game with Incomplete InformationB
	Exercise 7—Starting a Fight Under Incomplete InformationC
8 Auctions
	Introduction
	Exercise 1—First Price Auction with Uniformly Distributed Valuations—Two PlayersA
	Exercise 2—First Price Auction with Uniformly Distributed Valuations—N ≥ 2 PlayersB
	Exercise 3—First Price Auction with N BiddersB
	Exercise 4—Second Price AuctionA
	Exercise 5—All-Pay Auctions (Easy Version)A
	Exercise 6—All-Pay Auction (Complete Version)B
	Exercise 7—Third-Price AuctionA
	Exercise 8—FPA with Risk-Averse BiddersB
9 Perfect Bayesian Equilibrium and Signaling Games
	Introduction
	Exercise 1—Finding Separating and Pooling EquilibriaA
	Exercise 2—Job-Market Signaling GameB
	Exercise 3—Job Market Signaling with Productivity-Enhancing EducationB
	Exercise 4—Job Market Signaling with Utility-Enhancing EducationB
	Exercise 5—Finding Semi-Separating Equilibrium
	Exercise 6—Firm Competition Under Cost UncertaintyC
	Exercise 7—Signaling Game with Three Possible Types and Three MessagesC
	Exercise 8—Second-Degree Price DiscriminationB
	Exercise 9—Applying the Cho and Kreps’ (1987) Intuitive Criterion in the Far WestB
	References
10 Cheap Talk Games
	Introduction
	Exercise 1—Cheap Talk Game with Only Two Sender’s Types, Two Messages, and Three ResponsesB
	Exercise 2—Cheap Talk Game with Only Two Sender Types, Two Messages, and a Continuum of ResponsesB
	Exercise 3—Cheap Talk with a Continuum of Types—Only Two Messages (Partitions)B
	Exercise 4—Cheap Talk Game with a Continuum of Types—Three Messages (Partitions)B
	Exercise 5—Cheap Talk Game with a Continuum of Types—N Messages (Partitions)C
11 More Advanced Signaling Games
	Introduction
	Exercise 1—Poker Game with Two Uninformed PlayersB
	Exercise 2—Incomplete Information and CertificatesB
	Exercise 3—Entry Game with Two Uninformed FirmsB
	Exercise 4—Labor Market Signaling Game and Equilibrium RefinementsB
	Exercise 5—Entry Deterrence Through Price WarsA
	Exercise 6—Entry Deterrence with a Sequence of Potential EntrantsC
	References
Index