2. Two car drivers approach an intersection. Each driver can either stop or continue, and payoffs are Stop Continue Stop 1,1 2,1 - ɛ Continue 1-ɛ, 2 0,0 The parameter &, with 0 < < 1, reflects the fact that each driver dislikes being the only one to stop. Find the symmetric Nash equilibrium (equilibria?) of this game. Now suppose drivers are reeducated to feel guilty about choosing Continue. Payoffs are changed as follows:

2. Two car drivers approach an intersection. Each driver can either stop or continue, and payoffs are Stop Continue Stop 1,1 2,1 - ɛ Continue 1-ɛ, 2 0,0 The parameter &, with 0 < < 1, reflects the fact that each driver dislikes being the only one to stop. Find the symmetric Nash equilibrium (equilibria?) of this game. Now suppose drivers are reeducated to feel guilty about choosing Continue. Payoffs are changed as follows:

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 17P

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Question

help please. please be detailed please. i think we also need to draw some diagrams

2. Two car drivers approach an intersection. Each driver can either stop or
continue, and payoffs are
Stop
Continue
Stop
1,1
2,1 - E
Continue
1 - ɛ, 2
0,0
The parameter ɛ, with 0 < ɛ < 1, reflects the fact that each driver dislikes
being the only one to stop. Find the symmetric Nash equilibrium (equilibria?)
of this game.
Now suppose drivers are reeducated to feel guilty about choosing Continue.
Payoffs are changed as follows:
Stop
1,1
Stop
Continue 2-6,1 -E
Continue
1-, 2-8
-6, -6
Payoffs from playing Continue fall by a factor d > 0. Find the symmetric
equilibrium of the game. Compare the equilibrium expected payoff across the
two games.

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Step 1: Part 1 - Symmetric Nash equilibrium

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Step 2: Part 2 - Reeducation and guilt

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Step 3: Part 2a - New symmetric Nash equilibrium

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Step 4: Part 2b - Comparison of equilibrium expected payoff

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