Nash equilibrium

MANAGEMENT

Instructions: For full credit, you must show all the necessary steps (including the necessary

mathematical calculations) for your answer. If applicable, stay within the limit for the number

of the words of an answer, any additional words will not be graded and receive no credit.

1) . Consider the following normal form game:
Pe

a) Does the game have a solution to the IDSDS procedure? Describe your procedure briefly!

b) What is (are) the Nash equilibrium(ia) of this game?

2) a) Briefly explain the lexicographic and the semi lexicographic strategy. (65 words max)

b) What is the strength and weakness of the semi lexicographic strategy when you compare it

with the lexicographic strategy? (65 words max)

3) Your Parents promised to buy you a car for your graduation from university. You are not

concerned about the costs as they will pay the car for you and you believe that all cars have

similar maintenance costs.

You are however concerned about the safety and the image of the car. You identify seven

potential cars and allocate value to them reflecting their safety and image as shown in the table

below (O=worst, 100=best).

| Dodge |

| Electriccar | 9

| Ford S|

a) Plot each car’s value for safety and image on a graph whereby safety is on the X-axis and image

is on the Y-axis.

See next page for part b and part c of the question!