Homework: Chapter 12: Game Theory and Business Strategy Save Score: 0.33 of 1 pt
ID: 1162186 • Letter: H
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Homework: Chapter 12: Game Theory and Business Strategy Save Score: 0.33 of 1 pt 8 of 15 (15 complete) ? HW Score: 88.44%, 13.27 of 15 pts & Text Question 2.9 EQuestion Help The Great Recession of 2007-2009 hit young people particularly hard, with long-lasting effects. In June 2010, 15.3% of 20-to 24-year-old Americans were unemployed, compared to 8.2% for older workers. As a result, more adult children moved back to live with their parents or asked for financial help than in previous years. Jeff Look for Work Lof The share of 25-to 34-year-olds living in multigenerational households rose from 11% in 1980 to 20% in 2008" A recent survey finds that 41% of parents provide financial support to their 23- to 28-year old offspring. Indeed, parents give 10% of their income on average to their adult children. Support Mimi wants to support her son Jeff if he looks for work but not otherwise. Jeff wants to try to find a job only if his mother wil not support his life of indolence Mimi and Jeffs payoff matrix is illustrated in the figure to the right. Mimi If Jeff and Mimi choose actions simultaneously, what are the pure- or mixed-strategy Nash equilibria? No Support Determine the pure-strategy Nash equilibrium for this game. O A. The Nash equilibrium is for Mimi to not support and Jeff to loaf B This game has no Nash equilibria O C. The Nash equilibrium is for Mimi to support and Jeff to look for work. O D. The Nash equilibrium is for Mimi to not support and Jeff to look for work O E. The Nash equilibrium is for Mimi to support and Jeff to loaf Determine the mixed-strategy Nash equilibrium for this game The mixed-strategy Nash equilibrium is for Mimi to support with probability and for Jeff to look for work with probability (Enter your responses rounded to two decimal places.)Explanation / Answer
There is no NE because there is no strategy that is selected by both of the players.
Let the probability with which Jeff selects Look for Work be p and loaf with a probability 1-p. Expected payoff for Mimi is same under both strategies
4p -2(1-p) = -2p + 0(1-p)
4p - 2 + 2p = -2p
8p = 2
p = 0.25
Similarly, if q is the probability of selecting support and 1-q is the probability of selecting no support.
3q + 2(1-q) = 9q + 0(1-q)
3q + 2 - 2q = 9q
q = 0.25
Hence both probabilities are 0.25.
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