Answered: Consider the following game in which…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5CQQ

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Hi this is from a textbook. Thank you.

Consider the following game in which Sally can play T or B and John chooses between L or R. Each player makes their choice simultaneously. If Sally chooses T and John chooses L, Sally gets a payoff of 5 and John has a payoff of 4. If Sally plays T and John R, Sally’s payoff is 8 and John gets 3. If Sally Chooses B and John L, the payoffs are 3 to Sally and 2 to John. Finally, if Sally chooses B and John R, the payoffs are 7 to Sally and 0 to John. Which statement is true?

a) The Nash equilibrium is (B,R); this is a prisoners’ dilemma

b) The Nash equilibrium is (T,R); this is a prisoners’ dilemma

c) The Nash equilibrium is (T,R); this is not dominant strategy equilibrium

d) The Nash equilibrium is (T,L); this is a dominant strategy equilibrium

e) None of the above

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