"Inside  every small problem is a large problem struggling to get out."

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Respond to the question: Nash Equilibriumetc?

 11/19/2017 07:08 AM by Josh; Picasso
There are 6 NE in total, 4 pure and 2 mixed. For (seller,buyer), the pure NE are (1,1), (2,2), (3,1) and (3,3), which you can easily check by making a table and underlining best responses. As for the mixed NE, the buyer should also
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 11/19/2017 06:40 AM by Josh; Picasso
There are 6 NE in total, 4 pure and 2 mixed. For (seller,buyer), the pure NE are (1,1), (2,2), (3,1) and (3,3), which you can easily check by making a table and underlining best responses.

As for the mixed NE, the buyer should also offer 1 against a mix of 1 with probability 2/3 and 2 with probability 1/3; and, symmetrically, the seller should also offer 3 against a mix of 3 with probability 2/3 and 2 with probability 1/3.

But all these mixed equilibria accomplish is to lower the average payoff of one party by 2/3 of a million dollars. They are inefficient - the person who employs a mixture here is being malicious!

Finally, a unique solution can be found by eliminating weakly dominated strategies. First observe that neither 1 for the seller nor 3 for the buyer ever works out better than choosing 2. Then observe that once we rule out these two options, neither 3 for the seller nor 1 for the buyer ever does better than choosing 2. Thus probably the most sensible play is (2,2). [Manage messages]

 09/28/2017 09:26 AM by Tobi; Nash Equilibrium_etc.
Hey, Would be amazing if somebody could solve this problem for me. I have no clue, to be honest. Here it is: A seller and a buyer try to agree on the price of a Picasso painting. In the rest of this exercsie, all the values and [View full text and thread]

 09/28/2017 09:26 AM by Tobi; Nash Equilibrium_etc.
Hey, Would be amazing if somebody could solve this problem for me. I have no clue, to be honest. Here it is: A seller and a buyer try to agree on the price of a Picasso painting. In the rest of this exercsie, all the values and [View full text and thread]

 09/27/2017 09:08 AM by Tobi; Nash Equilibrium_etc.
Hey, Would be amazing if somebody could solve this problem for me. I have no clue, to be honest. Here it is: A seller and a buyer try to agree on the price of a Picasso painting. In the rest of this exercsie, all the values and [View full text and thread]