Question

Player I and Player 2 compete in the simultaneous game illustrated by the normal form game below Playoffs listed (Player 1, Player 2). Player 2 Middle Right High Medium OW Player I 8. 2 2.8 3.6 16, 7 What strategy is Player 1 playing in this game's equilibrium? a. High b. Mediunm c. Low What strategy is Player 2 playing in this game's equilibrium? a. Left b. Middle c. Right True or False: There exists a non-equilibrium intersection of strategies that would leave BOTH players better off (and neither worse off) relative to the equilibrium strategy intersection

Answer 1

Note that

• When player 2 selects Left, player 1 selects Medium (profit is maximum at 8)
• When player 2 selects Middle, player 1 selects High (profit is maximum at 5)
• When player 2 selects Right, player 1 selects Low (profit is maximum at 16)

Also,

• When player 1 selects High, player 2 selects middle (profit is maximum at 2)
• When player 1 selects Medium, player 2 selects Right (profit is maximum at 3)
• When player 1 selects Low, player 2 selects Left (profit is maximum at 8)

The only strategy common in these sets is When player 1 selects High, player 2 selects middle. This is the only Nash equilibrium

1) High 2) Middle 3) True. This is (Low, Right) where payoff is more to both (16, 7).