ECS4862 Assignment 2 (COMPLETE ANSWERS) Semester 1 2025 - DUE 17 June 2025; 100% correct solutions and explanations.

ECS4862 Assignment 2 (COMPLETE ANSWERS) Semester 1 2025 - DUE 17 June 2025; 100% correct solutions and explanations. QUESTION 1 (a) Suppose there are only two firms in a fast-moving consumer goods market. The producer is deciding whether to sell high-quality or low-quality products. The purchaser has two options either to buy or not buy. The annual profits associated with each strategy are given in the table below: Producer Sell high-quality goods Sell low-quality goods Purchaser Buy 200 ; 160 340 ; 80 Not buy 160 ; 280 240 ; 200 i) Determine whether either player has a dominant strategy. Explain. (4) ii) Determine whether there is a Nash equilibrium in this game. If so, what is it? If not, explain. (4) iii) Explain the concept of prisoner dilemma in game theory. Is this game an example of the prisoners’ dilemma? Explain. (5) iv) Assuming a sequential-move game in which the Purchaser chooses the strategy first, determine the pure Nash equilibrium of this game. (4) b) Siphiwe is in between jobs and has two job offers. She approaches you to get an economist's advice. Her first job offer pays a salary of R40 000 without a bonus. The second job offers a base salary of R20 000 but offers the possibility of a R40 000 bonus on top of