Section A
A1: Consider the following three-person game in which player 1 chooses between l and r, player 2 chooses between L and R, and player 3 chooses whether matrix A or matrix B will be played. The first number in each cell is the payoff to player 1, the second number is the payoff to player 2, and the third number is the payoff to player 3. The three players move simultaneously.
What are the Nash equilibria of the game? Are they Pareto efficient? Explain your reasoning.
A2: Explain how an increase in population mobility will affect the chances of a community successfully managing a local common property resource.
A3: What is ‘tit-for-tat’? Why might players choose to play tit-for-tat rather than the grim strategy in repeated games?
A4: ‘Strategic moves increase the set of strategies open to a player and therefore enable that player to achieve his or her preferred outcome in a game.’ Comment.
Section B
B1: ‘Economic man is indeed close to being a social moron’ (Amartya Sen). How compelling is the account of rational behaviour upon which game theory is based?
B2: Explain what is meant by the term ‘strategic move’. How can a firm currently in a market use strategic moves to discourage its rivals from entering the market in question?
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