Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider the below payoff matrix for a game of chicken. Two players drive their cars down the center of the road directly at
each other. Each player chooses SWERVE or STAY. Staying wins you more payoff only if the other player swerves. Swerving
loses face if the other player stays. However, the worst outcome is when both players stay.
Stay
Swerve
Stay
-0,-0
-6,6
Swerve
6,-6
9,9
Player 1 chooses rows and Player 2 chooses columns. Denote the probability of "Stay" for Player 1 as p and for Player 2 as
9.
What is the value of p so that Player 2 is indifferent between Stay and Swerve?
Write your answer as a decimal number with 2 decimal places (e.g. 0.05)
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