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# Table 1 B chooses Option 1 B chooses Option 2 A chooses Option 1 (a, b) (c,d) A chooses Option 2 (e, f) (g,h) . Under what conditions will &quot;both...

3 Cooperation problem and coordination problem

Consider Table 1, a payoff matrix for Player A and Player B.

a. Under what condition will Option 1 be a dominant strategy for Player A?

b. Under what condition will Option 1 be a dominant strategy for Player B?

Table 1 B chooses Option 1 B chooses Option 2 A chooses Option 1 (a, b) (c,d)
A chooses Option 2 (e, f) (g,h) . Under what conditions will “both players choosing Option 1” be a Nash equilibrium? . Under what conditions will “both players choosing Option 1” not be a Nash equi-
librium? . Under what conditions will “A choosing Option 2 while B choosing Option 1” be a
Nash equilibrium? . Now consider Table 2, another payoff matrix for Player A and Player B. Which
situation will Player A like the best? Table 2
B chooses Option 1 B chooses Option 2
A chooses Option 1 (4, 3) (2, —l)
A chooses Option 2 (—1, 2) (100, 200) . Which situation will Player B like the best? . Is “both players choosing Option 2” a Nash equilibrium? Why? '. Is “both players choosing Option 1” a Nash equilibrium? Why? '. Which problem do we see now, a coordination problem or a cooperation problem? . Now consider Table 3, another payoff matrix for Player A and Player B. Which
problem do we see now, a coordination problem or a cooperation problem? Table 3 B chooses Option 1 B chooses Option 2 A chooses Option 1 (4, 3) (500, —l)
A chooses Option 2 (-1, 500) (400, 400)

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