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12 views

Ex1

fjdsigdsigdsgidsjgi

Uploaded by

truonghachi36
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Exercise 1:

eBay’s recommendation: It is hard to imagine that anyone is not familiar with eBay°c , the most
popular auction website by far. The way a typical eBay auction works is that a good is placed for
sale, and each bidder places a “proxy bid”, which eBay keeps in memory. If you enter a proxy
bid that is lower than the current highest bid, then your bid is ignored. If, however, it is higher,
then the current bid increases up to one increment (say, 1 cent) above the second highest proxy
bid. For example, imagine that three people placed bids on a used laptop of $55, $98 and $112.
The current price will be at $98.01, and if the auction ended the player who bid $112 would win
at a price of $98.01. If you were to place a bid of $103.45 then the who bid $112 would still win,
but at a price of $103.46, while if your bid was $123.12 then you would win at a price of
$112.01.
Now consider eBay’s historical recommendation that you think hard about your value of the
good, and that you enter your true value as your bid, no more, no less. Assume that the value of
the good for each potential bidder is independent of how much other bidders value it.
(a) Argue that bidding more than your valuation is weakly dominated by actually bidding
your valuation.
(b) (b) Argue that bidding less than your valuation is weakly dominated by
actually bidding your valuation.
(c) Use your analysis above to make sense of eBay’s recommendation. Would
you follow it?

Ex2: Roommates: Two roommates need to each choose to clean their apartment, and each can
choose an amount of time  ≥ 0 to clean. If their choices are  and , then player ’s payoff is
given by (10-) -2  . (This payoff function implies that the more one roommate cleans, the
less valuable is cleaning for the other roommate.).
(a) What is the best response correspondence of each player ?
(b) Which choices survive one round of IESDS?
(c) Which choices survive IESDS?

Ex3: Popsicle stands: There are five lifeguard towers lined along a beach, where the left-most
tower is number 1 and the right most tower is number 5. Two vendors, players 1 and 2, each
have a popsicle stand that can be located next to one of five towers. There are 25 people located
next to each tower, and each person will purchase a popsicle from the stand that is closest to him
or her. That is, if player 1 locates his stand at tower 2 and player 2 at tower 3, then 50 people (at
towers 1 and 2) will purchase from player 1, while 75 (from towers 3,4 and 5) will purchase from
vendor 2. Each purchase yields a profit of $1.
(a) Specify the strategy set of each player. Are there any strictly dominated
strategies?
(b) Find the set of strategies that survive Rationalizability.

Ex4:
Splitting Pizza: You and a friend are in an Italian restaurant, and the owner offers both of you an

how many slices you would like; that is, each player  ∈ {1 2} names his desired amount of
8-slice pizza for free under the following condition. Each of you must simultaneously announce

pizza, 0 ≤  ≤ 8 If 1 + 2 ≤ 8 then the players get their demands (and the owner eats any leftover
slices). If 1 + 2  8, then the players get nothing. Assume that you each care only about how
much pizza you individually consume, and the more the better.
(a) Write out or graph each player’s best-response correspondence
(b) What outcomes can be supported as pure-strategy Nash equilibria?

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