Consider the following game that represents the payoffs from different advertising campaigns (low, medium, and high spending)
Question:
Consider the following game that represents the payoffs from different advertising campaigns (low, medium, and high spending) for two political candidates that are running for a particular office. The values in the payoff matrix represent the share of the popular vote earned by each candidate:
Candidate B - low | Candidate B - medium | Candidate B - high | |
Candidate A - low | 50, 50 | 40, 60 | 20, 80 |
Candidate A - medium | 60, 40 | 50, 50 | 35, 65 |
Candidate A - high | 80, 20 | 65, 35 | 50, 50 |
Suppose the above game is played sequentially, where Candidate A moves first and then Candidate B moves. What is the Nash equilibrium (rollback equilibrium) in this sequential move version of the game?
A. The Nash equilibrium (rollback equilibrium) occurs where both candidates use medium advertising campaigns.
B. Candidate A's strategy is low, and Candidate B responds with a high advertising campaign.
C. The Nash equilibrium (rollback equilibrium) for the sequential version of the game is the same as the Nash equilibrium for the simultaneous version.
D. There is no Nash equilibrium for this sequential game.
Making Hard Decisions with decision tools
ISBN: 978-0538797573
3rd edition
Authors: Robert Clemen, Terence Reilly