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# The “big assumption” of simple self interest

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The “big assumption” of simple self interest

1. (1 point) The “big assumption” of simple self interest in game theory is controversial. Do you think it is a valid assumption, or is it a big flaw? Explain. Do you think the stakes of the game (the overall size of the payoffs) matter for this issue? 2. (1.5 points) Consider the following game: A. Which of the players, if any, have a dominant strategy? Explain. B. Find the Nash Equilibrium for this game. (List the expectations and actions and find a match, not just the final outcome). C. Is this outcome Pareto Efficient? Explain. 3. (1 point) Consider the following game: Find the pure strategy Nash equilibria for this game. (List the beliefs and actions, not just the final outcomes.) Are these outcomes Pareto efficient? Why or why not? 4. (1 point) If there is no pure Nash Equilibrium for a game, what happens? 5. (1.5 points) Consider the following game: A. Suppose that this game was to be repeated an 10 times. What is the likely outcome according to game theory? B. Suppose instead that the game was repeated an indefinite number of times. What kind of strategy might create an outcome different from what you described in part A? C. What else has to be true for what you describe in part B to happen? Extra Credit for exact numbers. 6. (1 point) Create your own 2 player, 3 strategy each, sequential game. Indicate the Subgame Perfect Nash Equilibrium (SGPNE) for your game. 7. (1 point) Draw a game that shows successful entry deterrence in the SGPNE. 8. (1 point) Draw a game that shows unsuccessful limit pricing in the SGPNE. 9. (1 point) Draw a game that shows successful commitment in the SGPNE.

## [Solved] The “big assumption” of simple self interest

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- Submitted On 08 Jun, 2017 12:22:55

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### The “big assumption” of simple self interest

### The “big” S&P stock index futures contract trades only “in the pit

Part d

Closing price = $ 2000

As we have sold the futures contract as per our strategy in part b. We will incur loss because we have to close our contract by buying at predetermined future price of $ 2065 which h...