Question

n a small isolated town, there are two types of people, saints and crooks. In business dealings between any two residents of this town, the payoffs are below. Note that the buyer choose the rows and seller choose the columns.

Saint | 7,7 Crook 0,11 Saint Crook 11,0 I 4,4

Which of the following strategies are Nash equilibria?

A (Saint, Saint)

B (Saint, Crook)

C (Crook, Crook)

D None are Nash equilibria

Answer 1

Considering the first payoff is for left player and second for the top, we continue solving.

For the left or the row player, crook is a dominant strategy as the payoff the player receives from Crook is always higher than that from Saint, irrespective of what the other player plays.

For the second player also crrok is the dominant strategy.

The Nash equilibrium is therefore,

C. (Crook,Crook).