Printable page generated Sunday, 27 Dec 2020, 22:10TMA 02The assignment Cut-off date: 5 January 2021Important: These pages provide guidance on how to write your assignment. Please ensure you read all of this information right through until the checklist at the end.Before you start work on this assignment, please ensure that you have read the Assessment Guidance specific to this module and are familiar with the advice in Social Sciences Assessment Information. These sources contain support and guidance that you may need in writing your TMA including, for example, advice on plagiarism, referencing and the marking system. Note that failure to comply with relevant guidance could result in the loss of marks or other penalties.There are three parts to this TMA. Answer all three parts, noting the word limits. On the following pages you will find guidance on how to complete each of the different parts of this assignment. When you have completed the assessed parts of the TMA you will be invited to include reflections on the challenges of the TMA as this will help your tutor to provide appropriate feedback.Part A (25 marks)The Three Tuns and The Five Bells are the only two pubs operating in a small town called Thursty. The Three Tuns is a small pub, whereas The Five Bells is a larger venue. Thursty is hosting a one-day festival in the summer. To maintain social order, the council makes a recommendation that pubs should close for the duration of the festival.If both pubs close for the day they will receive a payment of £500 each from the local council. If one or both pubsremain open, the council will need to pay for additional policing, and no payment will be made to either pub.If The Three Tuns remains open but The Five Bells closes, their respective payoffs are anticipated to be £1000,£0.If The Five Bells remains open but The Three Tuns closes, their respective payoffs are anticipated to be £2000,£0.If both pubs remain open, The Three Tuns receive a payoff of £800 and The Five Bells receives a payoff of£1200.
For questions 1 to 3, assume that each pub must confirm independently with the council at 9am if they intend to close. Each assumes the other is rational, but they do not consult with each other.
1. Draw a payoff matrix to show this as a simultaneous one-shot game. (5 marks)
2. Assuming both pubs are fully informed about the anticipated payoffs, identify and explain in full any dominant strategies. (5 marks)
3. Are there any Nash equilibria in this game? Explain your answer in full. (5 marks)
4. Suppose now that The Five Bells decides first whether to open or to remain closed and that The Three Tuns knows The Five Bells’ decision before making its own decision. Draw an extensive form one-shotre presentation of this game identifying clearly the three sub games. Use these sub games to explain in full whether The Five Bells’ moving first results in any change in the outcome compared with the simultaneous version of the game. (5 marks)
5. The council now decides to adjust the amount they are willing to pay if both pubs close for the day: The Three Tuns will receive £1100 and The Five Bells will receive £1300. The other payoffs remain unchanged.Using game theory, explain how this adjustment will impact on the strategies of each pub and hence on the outcome of the game if it is played:(i) as a simultaneous one-shot game(ii) as a sequential one-shot game where The Five Bells moves first.
