Two players, A and B, play a simultaneous move game, each of which has two strat

Question

Two players, A and B, play a simultaneous move game, each of which has two strategies, R or L. If both play R, each will get a payoff of 10. In contrast, if both play L, each will get 5. If both of them play differently, the one who plays R will get 15, while the one who plays L will get 0. Now suppose the game changes. Suppose A has the right to choose his strategy first, then after observing A's choice, B chooses his strategy. In the equilibrium, how much does A gain from the right to choose his strategy first?

Explanation / Answer

Given that now A has the right to choose first and B will chose after observing A's stategy, A will choose to play R (right). This is because R is a strictly dominated startegy for A.

After A chooses R, B will choose to play R as well. This is because B get's a greater payoff (10) by playing R than by playing L(0).

A's payoff ´= 10 and B's payoff = 10.

Players B R L A R 10,10 15,0 L 0,15 5,5

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