Game Theory Exercise

Running head: GAME THEORY EXERCISE
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Game Theory Exercise Paper
Student's Name
Professor's Name
Affiliation
Date

GAME THEORY EXERCISE
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Game Theory Exercise
Question 1
Part a
The concept of credible commitment stems from a situation where individuals are unable to fulfil
their goals/objective because they are incapable of making credible promises. The graduate is
better able to showcase credibility because he/she has demonstrated commitment to a given
objective. The person with no degree/diploma is considered by the employer to be less credible
because his /her commitment to graduating is significantly diminished (therefore his/her promise
is not considered credible). The employer is therefore inclined to favour recruiting the graduate
over the non-graduate.
Part b
Talk is cheap: it is easy for an individual to claim he/she is going to graduate from college than it
is for that same person to actually get a degree or diploma in a given field. Employers prefer to
recruit people who can "walk the talk" i.e. actual graduates.
Part c
Graduate Non graduate
Desired Skills Desired Skills (if he
graduates)
Lacks Desired Skills
(does not graduate)
Hire Personnel

GAME THEORY EXERCISE
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Question 2
Part a
We get the Nash equilibrium by locating the strategy tat applies to both players and they would
have no intention of deviating from that particular course of action because it optimizes their
payoff. In this exercise, the Nash equilibrium can be obtained as follows:
The best strategy for player 1 regardless of what player 2 decisions to do is corporate
The best strategy for player 2 regardless of what player 1 decisions to do is corporate
Thus, the Nash equilibrium is to corporate; where both players each get payoffs of $2500
Part b
The players will be more inclined to corporate given they will not be losing money.
Player 2
Defect Corporate
Player 1 Defect 0,0 0,1
Corporate 1,0 1,1
Question 3
The cognitive bias of self interest; where individuals are more worried about personal gain
regardless of whether or not the rest of the population benefits. People will prefer to avoid
situations where they don't benefit. In economics it is believed that acting in one's personal
interest has a way of benefiting the community as a whole because these individuals enrich the
society. This belief stems from the theory of capitalism.
Question 4
No, they are more likely to seek out men who challenge and stimulate them at an intellectual
level. Moreover, intelligent women will prefer male partners who possess higher levels of