Points on a budget constraint represent combinations of the goods that exactly use up the household”s income, given market prices.
September 3, 2020
“The demand function for good X is Qdx = a + bPx + cM + e, where Px is the price of good X and M is income. Least squares regression reveals that =…
September 3, 2020

Find undominated strategies and unrationalizable strategies

7. Consider a game with two players, 3′ = 1, 2 where each has a continuous strategy,3,; E [0, 4], for 2′ = 1, 2. Suppose that the best response functions are the same for bothplayers and are given by: +l-s- ifs-E 0,1B.R§(Sj)= 2 J J l ) IbIUI plan if s, E [1, 4}(a) Characterize the set of undominated strategies in this game, and describe theresulting reduced game R1. (b) Characterize the set of undominated strategies in the reduced game R1 and describe the resulting reduced game R2. (c) Characterize the set of rationalizable strategies in this game.

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