Two players, Row and Column, will simultaneously and independently decide whether to 'share' or 'steal'. Cash outcomes have a 'prisoner's dilemma' structure. However, Column feels shame s > 0 if they choose 'Steal'. Row's payoff is their cash outcome; Column's is their cash outcome, minus their shame if they 'Steal'. The following matrix summarizes (each cell has Row's payoff first, and Column's second): Column Share Steal 0,8 – s 2, 2 – s Share 5,5 8,0 Row Steal This game has a unique Nash equilibrium, but it depends on s. What is the Nash equilibrium of this game, for different values of s? Explain.

Two players, Row and Column, will simultaneously and independently decide whether to 'share' or 'steal'. Cash outcomes have a 'prisoner's dilemma' structure. However, Column feels shame s > 0 if they choose 'Steal'. Row's payoff is their cash outcome; Column's is their cash outcome, minus their shame if they 'Steal'. The following matrix summarizes (each cell has Row's payoff first, and Column's second): Column Share Steal 0,8 – s 2, 2 – s Share 5,5 8,0 Row Steal This game has a unique Nash equilibrium, but it depends on s. What is the Nash equilibrium of this game, for different values of s? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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