Question: Consider the two player game in normal form below. Player 2 Player 2 Strategy A Strategy B Player 1 Strategy A (-2, -3) (9, 6)

Consider the two player game in normal form below.

Player 2 Player 2

Strategy A Strategy B

Player 1 Strategy A (-2, -3) (9, 6)

Player 1 Strategy B (1,8) (5,5)

(a) Find all (including mixed strategy) Nash equilibria.

(b) Which (if any) of the equilibria in a) are Pareto efficient?

(c) Now consider the sequential version of the game. Suppose the column player makes the first move and the row player makes the second move. How much would the row player be willing to pay to be the first mover?

(d) Now suppose the players can together decide on probabilities with which each strategy combination is played. Draw the payoff set and indicate which payoff combinations are Pareto efficient.

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