PAM200_Section11_Notes - PAM200 Section 11 Problem 14.1....

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Problem 14.1. The Nash Equilibrium is: Player 1 chooses Up while Player 2 chooses Left. Problem 14.2. There are two Nash equilibria. Nash equilibrium #1: Player 1 chooses SOUTH, Player 2 chooses WEST. Nash equilibrium #2: Player 1 chooses NORTH, Player 2 chooses EAST Problem 14.3. Player 1 has a dominant strategy (UP), which means that DOWN is dominated. Player 2 does not have a dominant strategy, but it does have a dominated strategy (MIDDLE). The Nash equilibrium in this game is for Player 1 to choose UP and Player 2 to choose LEFT Problem 14.4. In this game, “Aggressive” is a dominant strategy for both firms. Thus, the Nash equilibrium strategy for both firms is to choose “Aggressive.” This game is an example of the prisoners’ dilemma. In this game both players have a dominant strategy that leads to an outcome that does not maximize the collective payoffs of the players in the game. If both players chose the “Restrained” strategy, then both players would increase their profits and the collective payoff would be maximized. Problem 14.10.
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PAM200_Section11_Notes - PAM200 Section 11 Problem 14.1....

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