Question

Suppose the Department of Health decides to finally start enforcement. Any dispensary found not to be testing in a given period must pay $1,000 and each dispensary has a 20% chance of getting caught for not testing. There are no PR benefits to testing. This yields the payoff matrix:

a) Are there any Nash Equilibria?
b) Are the strategies interdependent?
c) Is there a dominant strategy?
d) Could the dispensaries do better if they could collude?

Dispensary 2 Don't Test Test 100, -200 -200, -200 -100,-100 -200, 100 Dispensary 1 Test Don't Test

Answer 1

O No #a) Th dispensary 1 chooses Test, then dispensary 2 will choose rest as – 100 - 200 and if dispensary 2 chooes Test, dispensary 1 chooses Test as -1007-200 So, (Test, Test) is a nash equilibriun. b) the strategies are interdependent, If player dispensary 1 chooses test then I its better for dispensary a to choose Test, Both dispensariks always choose Test no malter what other dispensades choose. of yes Pest is the dominant shahegy as it to always gives more pay off 1007-200 and 100 - 200 d Pf both collude and decide to best do not then test they will need be off better they but if decide to collude they then will be better off. but for that they do not need to collude as Test, Test) is a rash, equilibrium.