Question

Medical cannabis dispensaries in New Mexico are required to test all batches of product prior to sale. However, enforcement does not exist. Use the single-period game below to determine whether a medical cannabis dispensary will test or not. Testing costs $100.

Dispensary 2 Test -100,-100 | 0, -100 Don't Test -100, 0 Dispensary 1 Test Don't Test 0,0

a) Are there any Nash Equilibria?
b) Are the strategies interdependent?
c) Is there a dominant strategy?
d) Could the dispensaries do better if they could collude?

Answer 1

a (Don't Test, don't hest) is a nash equilibrium Wehen, Dispensary I chooses Don't test then, Dispensary a will choose Don't fest, so it is nash equilibrium , bi & each decision of a player is not affected by other player's decicican. . Both dispenscones always choose Don't test, no matter what other player chooses . es Yes Don't hest is a dominant strokegies strategy. . and test de No IB dispensades collude they do not do better. If they collude and then their pay off would be - 100 1000 which is les than 0. So, there is no need to collude: