Use the following payoff matrix for a one-shot game to answer the accompanying q

Question

Use the following payoff matrix for a one-shot game to answer the accompanying questions.

Player 2

Strategy

X

Y

Player 1

A

12, 12

6, -30

B

-30, 6

30, 30

a. Determine the Nash equilibrium outcomes that arise if the players make decisions independently, simultaneously, and without any communication.

Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.

Which of these outcomes would you consider most likely?

b. Suppose player 1 is permitted to “communicate” by uttering one syllable before the players simultaneously and independently make their decisions. What should player 1 utter?

(Click to select)BA


What outcome do you think would occur as a result?

c. Suppose player 2 can choose its strategy before player 1, that player 1 observes player 2’s choice before making her decision, and that this move structure is known by both players. What outcome would you expect?

Player 2

Strategy

X

Y

Player 1

A

12, 12

6, -30

B

-30, 6

30, 30

Explanation / Answer

a. 1. (12,12) as both players earn (6,12) at choosing one strategy and (-30,30) at choosing the other. So, both will prefer to choose where they earn positive return.

2. (30,30)

b. (30,30) as both decides before taking decision.

c. Player 2 will choose strategy X with payoff of (12,6). After observing this action, best response of Player 1 will be choosing strategy A. So, result will be (12,12)

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