Economics Thinking strategically
Credit any sources used, including books, articles, and web pages. Any standard method of citation is acceptable. You must indicate clearly direct quotations: any directly quoted text should be surrounded by quotation marks, and it should be absolutely clear that this is quoted text.This assignment gives two opportunities to apply game-theoretic principles to a real-world case.Each of your two answers should review briefly the central ideas, describe a real case that illustrates them, and find insights that are have relevance for the strategic decision-makers.Within each of your two answers, try to balance and connect parts (A) and (B). Because of the length constraint, you should review only the concepts that are relevant. The case discussion should be self-contained balance of description, interpretation, and analysis. You are encouraged to use any first-hand experience. Support your claims with facts, and examine whether the case matches the ideas that we explored.Part (A): How relevant is the theory to the question? How accurate and appropriate is the statement and explanation of the theory?Part (B): How relevant is the example? Is it documented with facts? How careful is the explanation of these facts? Does the example go beyond what a casual observer would know? How good is the quality of the analysis? Is it well connected to the theory in part (A)? Taking a business or other perspective, how interesting are the case, implications, and conclusions?Exposition: Is the answer well structured, concise, clearly written, and suitably referenced?Q5 (A) What does it mean to use “backward induction” or “rollback” to predict the play of a sequential-move game? What (implicit or explicit) assumptions are being made? When is the use of this technique most appropriate? (750 words)(B) Document a situation in which backward induction (or rollback) explains the outcome, and also an example of a situation in which the outcome deviated from the prediction. For the second case, why did the prediction fail? (750 words)Q12 (A) What is the “winner’s curse” in an auction? In the context of a simple ascending-price auction, how might bidders adjust their strategies to account for this? (750 words)(B) Find and document carefully two real-world situations in which (i) a winner appears to have fallen for the winner’s curse; and (ii) bidders seem to have acted cautiously out of a desire to avoid the curse. (750 words)
