Two customers ordered online food delivery, and their orders were assigned to the same delivery person...

 

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Two customers ordered online food delivery, and their orders were assigned to the same delivery person because they lived close by each other. The delivery person was trapped in traffic jam. While getting impatient, the two customers independently and simultaneously decide whether to issue a rush request (R) or not (N). If both customers choose N, then the delivery person will deliver the food to them slightly delayed at roughly the same time. Each customer receives a payoff of 10. If one customer chooses R while the other chooses N, then the delivery person will speed up and deliver first to the customer who has issued the rush request. This customer receives a payoff of 15. The other customer who has not issued a request receives a payoff of 8. The food delivery company penalizes their staff if they are issued more than one rush request within a short period of time. If both customers choose R, then the delivery person will be penalized, in which case he will be mad about the customers and will slow down (already penalized, he has nothing to lose). Both customers wait even longer to get their food, and each receives a payoff of 9. (a) Set up a normal-form representation of this game. (Note: Only the customers are players. The delivery person and his company are not players.) (5 points) (b) Find the Nash equilibrium of this game. Is the Nash equilibrium a dominant- strategy equilibrium? Is this game a prisoner's dilemma? Explain. (15 points) Two customers ordered online food delivery, and their orders were assigned to the same delivery person because they lived close by each other. The delivery person was trapped in traffic jam. While getting impatient, the two customers independently and simultaneously decide whether to issue a rush request (R) or not (N). If both customers choose N, then the delivery person will deliver the food to them slightly delayed at roughly the same time. Each customer receives a payoff of 10. If one customer chooses R while the other chooses N, then the delivery person will speed up and deliver first to the customer who has issued the rush request. This customer receives a payoff of 15. The other customer who has not issued a request receives a payoff of 8. The food delivery company penalizes their staff if they are issued more than one rush request within a short period of time. If both customers choose R, then the delivery person will be penalized, in which case he will be mad about the customers and will slow down (already penalized, he has nothing to lose). Both customers wait even longer to get their food, and each receives a payoff of 9. (a) Set up a normal-form representation of this game. (Note: Only the customers are players. The delivery person and his company are not players.) (5 points) (b) Find the Nash equilibrium of this game. Is the Nash equilibrium a dominant- strategy equilibrium? Is this game a prisoner's dilemma? Explain. (15 points)

Answer rating: 100% (QA)

SOLUTION a Normalform representation of the game R Customer 2 N Customer 2 R Customer 1 9 9 15 8 N Customer 1 8 15 10 10 In this representation The ro... View the full answer