16. Consider a stag-hunt game with payoffsBobBobstag rabbitAlice, stag5, 50,4Alice, rabbit 4,04,4The most likely experimental outcome in this game should be(A) (stag, stag);(B) (rabbit, rabbit);(C) (stag, rabbit);(D) (rabbit, stag).

Answered: 16. Consider a stag-hunt game with…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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16. Consider a stag-hunt game with payoffs
Bob
Bob
stag rabbit
Alice, stag
5, 5
0,4
Alice, rabbit 4,0
4,4
The most likely experimental outcome in this game should be
(A) (stag, stag);
(B) (rabbit, rabbit);
(C) (stag, rabbit);
(D) (rabbit, stag).

Expert Solution

STEP 1 (INTRODUCTION)

The game is defined as a model of a strategic situation in which players make strategic decision, which implies that participation takes into consideration the impact of each other actions, reactions and counteraction.

STEP 2 (EXPLANATION)

If Alice goes for Stag, then Bob will go for Stag.
If Bob goes for Stag, then Alice will go for Stag.
It implies that (Stag, Stag) is the Nash equilibrium.

If Alice goes for Rabbit, then Bob will go for Rabbit.
If Bob goes for Rabbit, then Alice will go for Rabbit.
It implies that (Rabbit, Rabbit) is the Nash equilibrium.

Because (4, 4) < (5, 5), it implies that (Rabbit, Rabbit) is not Pareto efficient. Thus, the most experimental outcome is (Stag, Stag).

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