Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

Thus the choice of strategy depends on: 
 
■ Nigel's and Amanda's risk attitudes: i.e. are they 'risk lovers' or 
'risk averse'? 
■ Nigel's and Amanda's estimates of how likely .the other is to 
own up. 
1. Why is this a dominant strategy game? 
2. How would Nigel's choice of strategy he affected if he had 
instead been involved in a joint crime with Jeremy, Pauline, 
Diana and Dave, and they had all.
Let us now look at two real-world examples of the Standing 
at concerts. 
When people go to some public event, such as a concert or 
a match, they often stand in order to get a better view. But once 
people start standing, everyone is likely to do so: after all, if they 
stayed sitting, they would not see at all. In this Nash equilibrium, 
most people are worse off, since, except for tall people, their view 
is likely to be worse and they lose the comfort of sitting down. 
Too much advertising: 
Why do firms spend so much on advertising? If they are 
aggressive, they do so to get ahead of their rivals (the maximax 
approach). If they are cautious, they do so in case their rivals 
increase their advertising (the maximin approach). Although in 
both cases it may be in the individual firm's best interests to 
increase advertising, the resulting Nash equilibrium is likely to be 
one of excessive advertising: the total spent on advertising (by all 
firms) is not recouped in additional sales. 

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More complex games with no dominant strategy: 
 
More complex 'games' can be devised with more than two 
firms, many alternative prices, differentiated products and various 
forms of non-price competition (e.g. advertising). In such cases, 
the cautious (maximin) strategy may suggest a different policy 
(e.g. do nothing) from the high-risk (maximax) strategy (e.g. cut 
prices substantially). 
In many situations, firms will have a number of different 
options open to them and a number of possible reactions by rivals. 
In such cases, the choice facing firms may be many. They may 
opt for a compromise, strategy between maximax and maximin. 
This could be a strategy that is more risky than the maximin one, 
but with the chance of a higher profit; but not as risky as the 
maximax one, but where the maximum profit possible is not so 
high.