Consider the following payoff matrix, where the payoffs are profits in thousand $. Explanation of payoff:
Question:
Consider the following payoff matrix, where the payoffs are profits in thousand $.
Explanation of payoff: If Player 1 chooses Strategy A and player 2 chooses Strategy B then Player 1 gets $100,000 and Player 2 gets $50,000
Player 2
Strategy A B C
A 250, 200 100, 50 170, 280
Player 1
B 260, 140 270,270 130, 130
C 265, 300 120, 130 125, 140
1. Find the Nash equilibrium if the players make the decisions simultaneously.
2. Are there any dominant strategies in the game?
3. Is this a prisoner's dilemma type problem? Explain why.
4. Find the outcome if both players are risk averse and choose a maxi-min strategy.
5. Now consider the game as sequential. How much would player 2 invest to be the first mover? Is there any potential for side payments? (one player offering the other to be 2nd mover) If so, who will pay and how much?
Managerial Economics and Business Strategy
ISBN: 978-0071267441
7th Edition
Authors: Michael R. baye