Midterm #1 Questions

PS491

Open Books; Open Notes; No electronic devices.

Three questions will be selected randomly from the 12 questions below, and you will write on any two of your choice

1. Find Nash equilibrium in a game in an extensive form and in a game in a strategic form [two simple games will be given].

2. Explain what Expected Utility is. Use this concept to show how decisions involving lotteries may be modeled. Provide several real life example where such modelling might be important

3. What is Nash equilibrium and why is it important? Give formal definition and an example from class and a couple of examples of your own.

4. Describe the conflict in Crimea through the prism of Game Theory. What kind of model would you use to approach the situation?

5. Think of at least two everyday life examples (non-political) where Game Theory can help predict and/or explain the outcome. How would you model such situations?

6. Using a scenario provided example involving a decision between a constant and a lottery, explain how risk-seeking, risk-neutral, and risk-averse individuals would respond to the decision and why. Please include graphs in your explanation.

7. Why is the Prisoners’ Dilemma model so important? Provide at least three everyday life examples that have a “flavor” of PD games.

8. Discuss the connection between studies of evolutionary processes and studies of cooperation. Use examples from the readings to illustrate your answer.

9. Think of two different real life examples that can be modeled using Prisoner’s Dilemma and “Welfare Game” (where the first player has to choose between equality and non-equality outcomes) games. What is the difference between these types of cooperation? In which areas PD is more applicable. Where do you think the “Welfare Game” is a better choice?

10. Explain what a mixed strategy Nash equilibria is and how it is different from a pure strategy Nash equilibria. Using the provided example, find the mixed strategy Nash equilibria.

11. Provide a real life example of a pure strategy Nash equilibria and a mixed strategy Nash equilibria. Model each using 2x2 matrixes.

12. Which games are used to model situations that require “coordination”? How many Nash Equilibrila can exists in such games? Provide your own examples of so-called “coordination mechanisms”.