21.Consider the following game, which depicts US and Soviet confrontation during the Cuban Missile Crisis. Each side has two options: to stand firm or back down. If both sides stand firm, the crisis escalates into global thermonuclear war. What is the equilibrium to this game (or equilibria, if more than one)? (a) Both the US and Soviet Union stand firm (b) Both the US and Soviet Union back down (c) The US stands firm and the Soviet Union backs down (d) The US backs down and the Soviet Union stands firm (a) and (b) (c) and (d)
21.Consider the following game, which depicts US and Soviet confrontation during the Cuban Missile Crisis. Each side has two options: to stand firm or back down. If both sides stand firm, the crisis escalates into global thermonuclear war. What is the equilibrium to this game (or equilibria, if more than one)? (a) Both the US and Soviet Union stand firm (b) Both the US and Soviet Union back down (c) The US stands firm and the Soviet Union backs down (d) The US backs down and the Soviet Union stands firm (a) and (b) (c) and (d)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
21.Consider the following game, which depicts US and Soviet confrontation during the Cuban Missile Crisis. Each side has two options: to stand firm or back down. If both sides stand firm, the crisis escalates into global thermonuclear war.
What is the equilibrium to this game (or equilibria, if more than one)?
(a) Both the US and Soviet Union stand firm
(b) Both the US and Soviet Union back down
(c) The US stands firm and the Soviet Union backs down
(d) The US backs down and the Soviet Union stands firm
(a) and (b)
(c) and (d)
Transcribed Image Text:Soviet Union
Stand Firm
Back Down
Stand Firm
1,1
4,2
US
Back Down
2,4
3,3
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In economics, the game theory is a tool for the strategic interaction of two rational decision-makers. This model is applied when the situation when the decisions are interdependent. Using the game theory, players can make the optimal decision.
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