1. The game below represents an international trade of two countries each having three strategies where all payoffs are measured in thousands of dollars. For simplicity, we have assumed that there are three alternatives facing each country: do not adopt the agreement and keep the status quo, adopt the agreement and produce porridge, or adopt the agreement and produce watermelon. West Indies East Indies Keep status quo Produce porridge Produce watermelons Keep status quo 55,000; 25,000 55,000; 23,000 55,000; 29,000 Produce porridge 59,000; 25,000 59,000; 23,000 63,000; 25,000 Produce watermelons 49,000; 30,000 47,000; 25,000 49,000; 29,000 a) Is there a dominant strategy for each country? b) Find the Nash equilibrium. 2. Find an example where the behavior of others forces an individual to cheat. Explain how moral sentiment can make individuals prosper in a competitive environment.

West Indies	West Indies	West Indies	West Indies	West Indies
East Indies		Keep status quo	Produce porridge	Produce watermelons
East Indies	Keep status quo	55,000; 25,000	55,000; 23,000	55,000; 29,000
East Indies	Produce porridge	59,000; 25,000	59,000; 23,000	63,000; 25,000
East Indies	Produce watermelons	49,000; 30,000	47,000; 25,000	49,000; 29,000

Answer rating: 100% (QA)

a To determine if there is a dominant strategy for each country we need to compare the payoffs for each strategy regardless of what the other country does For West Indies Keep status quo Payoff of 550... View the full answer