question archive Consider a very over-simplified descnption of the Cuban missile cnsis between the United States under John Kennedy and the Soviet Union under Nikita Khrushchev in 1963 Khrushchev starts the game by deciding whether or not to place intermediate range ballistic missiles in Cuba If he does place the missiles, Kennedy has three options do nothing, blockade Cuba, or eliminate the missiles by a surgical airstnke If Kennedy chooses the aggressive action of a blockade or an airstnke
Consider a very over-simplified descnption of the Cuban missile cnsis between the United States under John Kennedy and the Soviet Union under Nikita Khrushchev in 1963 Khrushchev starts the game by deciding whether or not to place intermediate range ballistic missiles in Cuba If he does place the missiles, Kennedy has three options do nothing, blockade Cuba, or eliminate the missiles by a surgical airstnke If Kennedy chooses the aggressive action of a blockade or an airstnke
Subject:EconomicsPrice: Bought3
Consider a very over-simplified descnption of the Cuban missile cnsis between the United States under John Kennedy and the Soviet Union under Nikita Khrushchev in 1963 Khrushchev starts the game by deciding whether or not to place intermediate range ballistic missiles in Cuba If he does place the missiles, Kennedy has three options do nothing, blockade Cuba, or eliminate the missiles by a surgical airstnke If Kennedy chooses the aggressive action of a blockade or an airstnke. Khrushchev may acquiesce, or he may order escalation, possibly leading to nuclear war The following figure shows the game tree We have represented the outcomes by letters, which you have to replace by payoffs to Kennedy and Khrushchev to complete the descnption Please certainly note that the game is not zero sum, and x and z are certainly worse than u for both players
1 Suppose the players in the Cuban missile crisis had the following preference orderings for the outcomes ti Payoff (Most preferred) Kenndy u w y z Solve this sequential move game to find both the Subgame Perfect Nash Equilibrium and the Stackelberg equilibrium [10 Marks]
3
V
0,4:4 irn•Irrrr
2 Suppose the players in the Cuban missile crisis had different preference orderings as follows
Payoff; 6 (Most preferred) t., 4 2 x 4 f - ----(Leait preferred) Kenndy Khrushchev u w y 2- u, u- v 0
Solve this sequential move game to find the Stackelberg equilibrium Only.
[10 Marks]
3 Compare your Stackelberg equilibna in parts (a) and (b) to find whether different preference ordenngs generate different equilibrium payoffs to the two players? Which player prefers to have the prelerence orderings in part a? [5 Marks] 4 Suppose that Kenndy's preference ordering is given as in part a, and Khrushchev's partial preference ordering is given below What preference ordenng should Khrushchev have if he wants to achieve the highest payoff p e , 61? Such ordering is called an 'optimal ordering" Please list all possible optimal preference orderings for Khrushchev [10 Marks]
Pn,11
Kenndy Klir.hrlsev
fi (111.,
