ECON 221 Study Guide - Midterm Guide: Exim, Sequential Game, Nash Equilibrium
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This exam has 5 questions, which in total are worth 50 marks. Exams taken in pencil may be refused a regrade at the instructor"s discretion. Consider the following simultaneous move game in which players only play pure strategies: A kidnapper (let"s call him k from now on) is deciding whether to kidnap a very important businessman (let"s call him b from now on) or not. If k decides not to kidnap b, k gets a payoff of 2 and b gets a payoff of 4. If k kidnaps b, then b has to decide whether to pay ransom or not. Two firms are involved in a race to develop a new technology. We can model this race as sequential game with perfect information in which the players alternately choose how many steps to take. Player i is initially ki steps from the finish lane (where i=1, 2).