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Using the IDSDS, find where the drug dealers locate.

10. Two students are to take an exam, and the professor has instructed them

that the student with the higher score will receive a grade of A and the one

with the lower score will receive a B. Student l’s score equals x1 + 1.5,

where xj is the amount of effort she invests in studying. (That is, I assume

that the greater the effort, the higher is the score.) Student 2’s score equals

x2, where x2 is the amount of effort she exerts. It is implicitly assumed that

student 1 is the smarter of the two, in that, if the amount of effort is held

fixed, student 1 has a higher score by an amount of 1.5. Assume that x1

and

x2 can take any value in {0,1,2,3,4,5). The payoff to student i is 10 x; if

she gets an A and 8 x; if she gets a B, i = 1, 2.

a. Derive the strategies that survive the IDSDS.

b. Derive the strategies that survive the iterative deletion of weakly domi-

nated strategies. (The procedure works the same as the iterative dele-

tion of strictly dominated strategies, except that you eliminate all

weakly dominated strategies at each stage.)

11. Groucho Marx once said, I’ll never join any club that would have me for a

“VT 110

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Explanation & Answer:

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Tags:

math

economics

Game Theory

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