Problem Set #11 - David Morrow

9 downloads 1395 Views 55KB Size Report
Problem Set #11. EC 330/PHL 321. Due in class on Tuesday, April 12, 2011. For Problem Set #11, read Chapter 7 from Dixit & Nalebuff's Art of Strategy ( ...
Problem Set #11 EC 330/PHL 321 Due in class on Tuesday, April 12, 2011

For Problem Set #11, read Chapter 7 from Dixit & Nalebuff’s Art of Strategy (available on Blackboard) and then complete the assignment below.

1. Dixit & Nalebuff identify eight types of strategic moves for making your commitments credible. These types are listed below. For each type of strategic move, (i) give a real or hypothetical example of a situation in which that type of strategic move might be helpful, (ii) explain how using that strategic move will help a player make a credible commitment, and (iii) state whether the strategic move changes the players, strategies, or payoffs of the game. a. Write contracts to back up your resolve. b. Establish and use a reputation. c. Cut off communication. d. Burn bridges behind you. e. Leave the outcome beyond your control, or even to chance. f. Move in small steps. g. Develop credibility through teamwork. h. Employ mandated agents.

2. Describe a real or hypothetical game in which one player wants another player to be unable to make a credible commitment. Describe at least one thing that the player can do to make it harder for the other player to make that commitment. (See pages 222–225 of Art of Strategy, on “undermining your opponent’s credibility,” for examples.)

1