Question

Use the following payoff matrix for a one-shot game to answer the accompanying questions.

		Player 2
	Strategy	X	Y
Player 1	A	25, 25	10, -200
	B	-200, 10	45, 45

a. Determine the Nash equilibrium outcomes that arise if the players make decisions independently, simultaneously, and without any communication.

Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.

• (45,45)unchecked
• (10,-200)unchecked
• (-200,10)unchecked
• (25,25)unchecked

Which of these outcomes would you consider most likely?

• (10,-200)

• (45,45)

• (-200,10)

• (25,25)

b. Suppose player 1 is permitted to “communicate” by uttering one syllable before the players simultaneously and independently make their decisions. What should player 1 utter?

• B

• A

What outcome do you think would occur as a result?

• (45,45)

• (-200,10)

• (10,-200)

• (25,25)

c. Suppose player 2 can choose its strategy before player 1, that player 1 observes player 2’s choice before making her decision, and that this move structure is known by both players. What outcome would you expect?

• (45,45)

• (10,-200)

• (-200,10)

• (25,25)

Answer 1

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1F player 1 allowed to Cf Mt ComMUnicot be will aldayy hen Syllabl "' besf respanfe then then if P1 chooses B P2 is oufeom be an Nash equi; &riun (B,k) to Cfer P2 TA f ommunicafed with 5y1lable 45,49 IS an ou te ore Optinm A PI1 should utter Bsyllabl Answer P4 A (a (.) 45 PI 2 Nill always strategy Y" beraup plat th en the outcome isCB,Y) = (45,45) Option 1 s Corvert