Two Players Are Engaged in a Game of "Chicken

question 22

Multiple Choice

Two players are engaged in a game of "chicken." There are two possible strategies, Swerve and Drive Straight.A player who chooses to Swerve is called "chicken" and gets a payoff of zero, regardless of what the other player does.A player who chooses to Drive Straight gets a payoff of 48 if the other player Swerves and a payoff of -48 if the other player also chooses to Drive Straight.This game has two pure strategy equilibria and

• A)a mixed strategy equilibrium in which each player swerves with probability 0.50 and drives straight with probability 0.50.
• B)a mixed strategy in which each player swerves with probability 0.25 and drives straight with probability 0.75.
• C)a mixed strategy equilibrium in which one player swerves with probability 0.50 and the other swerves with probability 0.50.
• D)two mixed strategies in which players alternate between swerving and driving straight.
• E)no mixed strategies.

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Definitions:

Issue Price

The price at which a new issue of securities is offered to the public.

Strip Bond

A bond where both the principal and regular interest payments have been removed, typically sold at a discount and pays no interest until maturity.

Yield Rate

The income return on an investment, such as the interest or dividends received, expressed annually as a percentage based on the investment's cost, current market value, or face value.

Strip Bond

A debt security that has had its principal and coupon payments detached and sold separately.