Question

Suppose that the Department of Health continues to not enforce testing requirements, but patients start to discriminate against producers that do not test their products, i.e., there are PR benefits from testing equal to $200, but a dispensary only benefits if the other dispensary does not test. Again, testing costs $100. Using the single-period game payoff matrix below, determine how Dispensary 1 and Dispensary 2 will behave.

Dispensary 2 Test -100,-100 | 0, 100 Dispensary 1 Test Don't Test Don't Test 100, 0 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 espns ary 1 chooses Ront kut, peniany 2 uill choose est as 1000.and h spem ay chooses Test choose Ron't hut. as Nhen Aispeusary 2 Go So, (Bant hut, kest) and (ut ,Aan't fest) nash eapdliria. are wheu ín ker dapendent test che legies 4 choopes ix pensay as are ,ih babler Par dispenonig 2 ho choose Don't het Tdispens ay 1 ehooces lon't ut, fh he ler to choopa hest far dispes ang 2 daminout chate gy 4 Phue is MO No, i6 Nhey co llude , Nhey cwl gut Jaun