Economics
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Question from Past Microeconomics Qualifying Exam[]

Fall 2000 - Section I, Question five, George Mason University

True, False, Uncertain. Determine whether or not each of the following statements are true or false. Explain your reasoning briefly in a paragraph or two. (The explanation is often more important than the answer given). Include a carefully labeled diagram or game matrix if it helps to clarify your answer.


A Nash equilibrium cannot contain strategies that are weakly dominated.

Answer[]

False. A weakly dominant strategy is defined as never being strictly worse but also never being stricly better than other strategies. A strategy with these characteristics can be a Nash equilibrium, because no one would want to change their strategy if they cannot achieve a better payoff.

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