Consider the following dynamic game. There are two players (P1, P2). Player 2 tries to rob Player 1. If Player 1 pays $100, the game is over with Player 1 (victim) paying $100 to Player 2 (robber) (P1: -$100, P2: +$100). If Player 1 refuses to pay $100, then Player 2 has two choices: one is to hurt Player 1 (P1: -$5,000, P2: -$1,000) and the other is to walk away (P1: 0, P2: 0). Explain how to find an equilibrium in this game.
Consider the following dynamic game. There are two players (P1, P2). Player 2 tries to rob Player 1. If Player 1 pays $100, the game is over with Player 1 (victim) paying $100 to Player 2 (robber) (P1: -$100, P2: +$100). If Player 1 refuses to pay $100, then Player 2 has two choices: one is to hurt Player 1 (P1: -$5,000, P2: -$1,000) and the other is to walk away (P1: 0, P2: 0). Explain how to find an equilibrium in this game.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 2E
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Consider the following dynamic game. There are two players (P1, P2). Player 2 tries to rob Player 1. If Player 1 pays $100, the game is over with Player 1 (victim) paying $100 to Player 2 (robber) (P1: -$100, P2: +$100). If Player 1 refuses to pay $100, then Player 2 has two choices: one is to hurt Player 1 (P1: -$5,000, P2: -$1,000) and the other is to walk away (P1: 0, P2: 0). Explain how to find an equilibrium in this game.
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