The payoff matrix is as given below. Is there a dominant strategy for either player? Find all the (pure strategy) Nash equilibria in the game. How would this change if, instead, the mediation is costless and yields a payoff of 50 to each nation (assuming mutually successful mediation) and a payoff of 0 (if the other nation chooses otherwise)? **
As you may have heard, Russia decided to invade its neighbor, which has led to international condemnation (albeit not on all fronts). The EU, a former major importer of gas from Russai, went ahead with sanctions. Imagine, if you will, that the respective heads of state get together and try to negotiate a trade agreement to end sanctions. They each have three possible choices: (a) Maintain tariffs against the other nation (T); (b) Seek mediation from the WTO, which would implement an international trade agreement at a small cost (M); (c) Unilaterally remove tariffs (F). The payoff matrix is as given below. Is there a dominant strategy for either player? Find all the (pure strategy) Nash equilibria in the game. How would this change if, instead, the mediation is costless and yields a payoff of 50 to each nation (assuming mutually successful mediation) and a payoff of 0 (if the other nation chooses otherwise)? **
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