Two lawyers go to an expensive restaurant. They can order the appetizer (A) or t

Question

Two lawyers go to an expensive restaurant. They can order the appetizer (A) or the main course (M). Each gets an utility worth $10 from the appetizer and an utility worth $15 from the main dish. The price of the appetizer is $7, and the price of the main course is $13.

a. First assume that each lawyer will pay his own bill. Describe their decision making process as a normal form game (describe the payoff matrix). Identify the Nash equilibrium or equilibria. Do you think that the Nash equilibrium or equilibria is a reasonable solution for this game?

b . Next assume that they decide to split the total bill, half and half. Describe their decision making process as a normal form game. Will the lawyers behave differently compared to the way they would under situation (a)? Have you encountered this game in class before?

Explanation / Answer

In the first scenario, when each pays his own bill the decision lies on the utility derived from the food. Both the lawyers will eat the main course as it has the maximum utility. The Nash equilibria lies when both order the main course as both derive maximum utility from it. Yes it is a reasonable solution for this game as both lawyers are profitable here. However, in the second scenario when the bill is going to be split in half both lawyer will try to order the same food either appetizer or main course.

Lawyer 2 Utility Appetizer Main Course Lawyer 1 Utility Appetizer 10, 10 10, 15 Main Course 15, 10 15, 15 Lawyer 2 Profit Appetizer Main Course Lawyer 1 Profit Appetizer 0, 0 (3), 3 Main Course 3, (3) 0, 0

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