8 The following game is a version of the Prisoners\' Dilemma. Suspect 2 Fink 0,0

Question

8 The following game is a version of the Prisoners' Dilemma. Suspect 2 Fink 0,0 1,3 Silent 3,-1 Suspect 1Fink Silent a. Both suspects have a dominant strategy that is to fink b. Both suspects have a dominant strategy that is to keep silent c. None of the suspects has a dominant strategy. d. The suspects may or may not have a dominant strategy 9 Based on the above information (in question 8), we conclude that a. there is no Nash equilibrium. b. the Nash equilibrium payoff would be (0, 0). c. the Nash equilibrium payoff would be (1, 1) d. the information is not sufficient to determine if a Nash equilibrium exists. 10 Given on the following payoff matrix Firm B Low R&D; 100, 220 High R&D; 50, 270 200, 120 Firm A Low R&D; High R&D; 150, 150 a. Both firms have a dominant strategy b. None of the firms has a dominant strategy. c. Firm A has a dominant strategy while firm B does not. d. Firm B has a dominant strategy while firm A does not. 11 Based on the above information (in question 10), we conclude that a. the Nash equilibrium payoff would be (100, 220). b. the Nash equilibrium payoff would be (150, 150). c. the Nash equilibrium payoff would be (50, 270). d. the Nash equilibrium payoff would be (200, 120). e. there is no Nash equilibrium.

Explanation / Answer

8)

We will find the best response function for both the suspects.

Suspect 1

BR1(Fink) =Fink

BR1(Silent) = Fink

Suspect 2

BR2(Fink) =Fink

BR2(Silent) = Fink; since both the players have same best response for all the action chosen by the rival player i.e. fink.

So, the correct option is a)

9) the correct option is b). Both the suspect chooses their dominant strategy fink

10) We will find the best response function for both the suspects.

Firm A

BRA(Low R&D) = High R&D

BRA(High R&D) = High R&D

Firm B

BRB(Low R&D) = High R&D

BRB(High R&D) = Low R&D; since Firm A have same best response for all the action chosen by theFirm B i.e. High R&D.

So the correct option is c)

11) The correct option is option b, because the Nash equilibrium is the mutual best response. Thus the Nash equilibrium is (High, Low)

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