Question: Problem 3 (4 points) Consider a tariff-setting game between three countries, A, B, and C. These countries are different sizes, and tariffs may have

Problem 3 (4 points) Consider a tariff-setting game between three countries, A, B, and C. These countries are different sizes, and tariffs may have terms-of-trade effects (and deadweight losses). The left and right payoff matrices below indicate payoffs from combinations of B and C's actions when A sets a tariff and when it does not, respectively. The game is played simultaneously, and payoffs are written (UA.Un.Ue). A plays Tariff A plays No Tariff C Tariff Tariff (35.0.0) No Tariff (40,0,10) Tariff Tariff (20,20,20) No Tariff (35,20,10) B No Tariff (40,10,0) (60,0,0) No Tariff (35,10,20) (55,20,20) 3.3 What payoff does A end up getting in the Nash equilibrium? For 3.4, suppose that before the game begins, B and C enter an international agreement to split their payoffs evenly, regardless of the outcome. 3.4 What payoff does A end up getting in the Nash equilibrium?

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