4 Bad intersection (6 pts.) "You're a rotten driver,” I protested. “Either you ought to be more careful or you oughtn't...
4 Bad intersection (6 pts.) "You're a rotten driver,” I protested. “Either you ought to be more careful or you oughtn't to drive at all.” "I am careful.” "No, you're not." "Well, other people are,” she said lightly. “What's that got to do with it?” "They'll keep out of my way,” she insisted. “It takes two to make an accident.” -F. Scott Fitzgerald, The Great Gatsby Two drivers, Jordan Baker and Nick Carraway, are approaching each other on a dark road. In the quotation above, Jordan is the “rotten driver”, Nick Wait Turn 0,0 1,6 2,1 0,-1 10,0 -3, -7 Stop Slow Speed Jordan a. (1 pt.) Suppose this is a static game, where both players move at the same time. Circle all payoffs corresponding to best responses. Find any/all pure strategy Nash equilibria. b. (3 pts. Now suppose Jordan moves first, followed by Nick. (Her car is moving faster, so if she wants to brake, she has to react quickly.) Draw the game tree. Then use backward induction to find the subgame perfect Nash equilibrium. (Remember to say what each player chooses at every decision node.) What are the equilibrium payoffs? c. (2 pt.) Now suppose that Nick moves first, followed by Jordan. Assuming that both players are rational, which action will Nick choose, and how will Jordan respond? Does this game exhibit first-mover advantage or second-mover advantage?