Question: Two drivers (Driver 1 and Driver 2) are approaching an intersection at right angles at the same time, such that if neither stops they will
Two drivers (Driver 1 and Driver 2) are approaching an intersection at right angles at the same time, such that if neither stops they will collide. Simultane- ously they each choose whether to stop or continue. If Driver i continues and Driver j stops (i; j = 1; 2, i 6= j), Driver i gets a payo of 100 while Driver j gets a payo of 100 sj . If both stop, Driver i earns 100 si. If they collide, Driver i earns a payo of 100 ci, where 0 < si < ci < 100. 10 points (a) Solve for all Nash equilibria, considering both pure and mixed strategies. 5 points (b) What will be the e ect on each Nash equilibrium of c2 increasing (but remaining below 100), holding s1, s2, and c1 constant? Provide careful intuition for your
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