Question

The payoff matrix shows the payoffs for two consumers when there are two standards that may be adopted. Amy prefers the PS3 gaming console and Zoey prefers the Wii gaming console, but they like to game together, so they prefer to have the same system. Zoey PS3 Wii If Zoey chooses PS3, then Amy's best response is 2000 30 PS3 4000 300 O Wi. O PS3 Amy When Zoey chooses PS3, what is Amy's payoff if she chooses the response you selected? 200 3000 Wii 10 2300 Amy's payoff If Zoey chooses Wii, then Amy's best response is O Wii O PS3

Answer 1

If Zoey chooses PS3 ,amy's best response is PS3 because it gives a higher payoff to amy.

Amy's payoff : 4000

If zoey chooses Wii, then am's best response is Wii because it gives a higher payoff to amy.

Amy's payoff : 2300

There are 2 nash equilibria in this game. They are - both choose PS3 and both choose Wii. At these strategies there is no incentive for any player to switch to some other strategy and hence its a nash equilibria.