Consider a modified Traveler’s Dilemma. In terms of strategy options that the players have and the dollars they earn, it is like the standard Traveler’s Dilemma, but the players do not have endless appetite for money. Up to 100 dollars, each dollar feels like a dollar. But any money beyond 100 is psychologically like 100 dollars. Assuming that players are maximizers of ‘psychological’ dollars instead of real dollars, describe all the Nash equilibria of this modified Traveler’s Dilemma.

Consider a modified Traveler’s Dilemma. In terms of strategy options that the players have and the dollars they earn, it is like the standard Traveler’s Dilemma, but the players do not have endless appetite for money. Up to 100 dollars, each dollar feels like a dollar. But any money beyond 100 is psychologically like 100 dollars. Assuming that players are maximizers of ‘psychological’ dollars instead of real dollars, describe all the Nash equilibria of this modified Traveler’s Dilemma.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.1P

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