Suppose Paolo and Sharon are playing a game in which both must simultaneously ch

Question

Suppose Paolo and Sharon are playing a game in which both must simultaneously choose the action Left or Right. The payoff matrix that follows shows the payoff each person will earn as a function of both of their choices. For example, the lower-right cell shows that if Paolo chooses Right and Sharon chooses Right, Paolo will receive a payoff of 9 and Sharon will receive a payoff of 5. Sharon Left Right Paolo Left 6, 6 8, 5 Right 3, 6 9, 5 The only dominant strategy in this game is for to choose . The outcome reflecting the unique Nash equilibrium in this game is as follows: Paolo chooses and Sharon chooses .

Explanation / Answer

The game has a unique Nash equilibrium where Sharon chooses Left for whatever is choosen by Paolo. Paolo follows and choose the best option available after Sharon's decision: to choose Left.

Only Sharon has dominant strategy of choosing Left as her payoffs are higher in Left than in Right.

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