Question

You have to do a two-student project in a class. Assume that you and your partner are both interested in maximizing your grade, but you are both very busy and get more happiness if you can get a good grade with less work. The strategy choices for you and your partner and the resulting payoffs are described in the figure below. 

(a) What is your dominant strategy? What is your partner’s dominant strategy? Explain. 

(b) What is the Nash equilibrium in this situation? Explain. 

(c) If you and your partner are required to work together on a number of projects throughout the semester, how might this change the outcome you predicted in parts (a) and (b)?

Answer 1

1. We both will have the dominant strategy of doing less hard work as it gives an equilibrium solution as shown by below image. It is getting 6/10 each in lower right box market by red and green both.
   YOUR PARTNER Work Hard Work Less Hard Grade-A, but you had to wok 10 hours. Happi ness 7/10 Grade-A, and you only worked S hours. Happiness 9/10 Grade A, but you had to wok 10 hours. Happi- ness 7/10 Grade-A, but you had to work 15 hours. Happiness 4/10 YOU Grade-A, but you had to work 15 hours. Happiness Grade B, but you only worked S hours. Happiness yor Less Har 4/10 6/10 Grade-A, and you only worked 5 hours. Happiness Grade B but you only worked 5 hours. Happiness 9/10
   

B.

Nash Equilibrium is achieved in lower right box that gives grade of 6/10 to each of the student by doing “less hard work”.

C.

It can be seen that if both the students work together and choose to “work hard”, they can get 7/10 grade each for both the students. Thus, while doing many projects together in a semester, they can choose to work hard and get better grades (7/10).