Consider the following game of chicken. Two firms are considering entering the market for fidget spinners. The payoffs from each possible action (enter or not enter) are presented in the payoff matrix below. The first payoff in each cell is for Twisters:
Acme Inc
Don't enter
Enter
Twisters
Don't enter
( 0, 0 )
( 0, 1 )
Enter
( 1, 0 )
( -2, -2 )
If both Acme and Twisters make their choice simultaneously, which of the following is true?
a. This game has no Nash equilibrium.
b. This game has a single Nash equilibrium.
c. This game has more than one Nash equilibrium.
d. Neither Acme Inc nor Twisters has a strictly dominant strategy.
e. both c and d are correct.
Consider the following game of chicken. Two firms are considering entering the market for fidget spinners. The payoffs from each possible action (enter or not enter) are presented in the payoff matrix below. The first payoff in each cell is for Twisters:
|
Acme Inc |
|||
|
Don't enter |
Enter |
||
|
Twisters |
Don't enter |
( 0, 0 ) |
( 0, 1 ) |
|
Enter |
( 1, 0 ) |
( -2, -2 ) |
|
If both Acme and Twisters make their choice simultaneously, which of the following is true?
|
a. This game has no Nash equilibrium. |
||
|
b. This game has a single Nash equilibrium. |
||
|
c. This game has more than one Nash equilibrium. |
||
|
d. Neither Acme Inc nor Twisters has a strictly dominant strategy. |
||
|
e. both c and d are correct. |
Answer verification
Related textbook solutions
Related questions
7. Solving for dominant strategies and the Nash equilibrium
Suppose Larry and Megan are playing a game in which both must simultaneously choose the action Left or Right. The payoff matrix shows the payoff each person will earn as a function of both of their choices. For example, the lower-right cell shows that if Larry chooses Right and Megan chooses Right, Larry will receive a payoff of 5 and Megan will receive a payoff of 5.
| Megan | |||
| Left | Right | ||
| Larry | Left | 6, 6 | 6, 3 |
| Right | 4, 3 | 5, 5 | |
The only dominant strategy in this game is for _____ to choose _____.
The outcome reflecting the unique Nash equilibrium in this game is as follows: Larry chooses _____ and Megan chooses _____.
Suppose Lorenzo and Neha are playing a game in which both must simultaneously choose the action Left or Right. The payoff matrix that follows shows the payoff each person will earn as a function of both of their choices. For example, the lower-right cell shows that if Lorenzo chooses Right and Neha chooses Right, Lorenzo will receive a payoff of 6 and Neha will receive a payoff of 5.
| Neha | |||
| Left | Right | ||
| Lorenzo | Left | 8, 4 | 4, 5 |
| Right | 5, 4 | 6, 5 | |
The only dominant strategy in this game is for (Neha/Lorenzo) to choose (Right/Left).
The outcome reflecting the unique Nash equilibrium in this game is as follows: Lorenzo chooses (Right/Left) and Neha chooses (Right/Left).
