Graded Assignment Due Sunday 12.03.17 at 11:00 PM Attempts:|1 Keep the Highest:

Question

Graded Assignment Due Sunday 12.03.17 at 11:00 PM Attempts:|1 Keep the Highest: 14 5. Solving for dominant strategles and the Nash equilibrium Suppose Steve and Karen are playing a game in which both must simultaneously choose the strategy Heads or Tails. The payoff matrix that follows shows the payoff each person will earn as a function of both of their choices (rather than the actual flipping of a coln). For example, the lower-right cell shows that If Steve chooses Talls and Karen chooses Tails, Steve will recelve a payoff of 2 and Karen will recelve a payoff of 4. Heads 5, 2 Heads 4, 3 Steve Tails 3, 5 2, 4 to choose The only dominant strategy in this game is for and Karen chooses The unique Nash equilibrium in this game is as follows: Steve chooses

Explanation / Answer

a. Steve, Heads.

Dominant strategy means a player would choose an action, always, irrespective of the action chosen by the opponent.

So, Steve would always choose heads, irrespective of what is chosen by Karen. By choosing head it would earn higher payoff (5,4) no matter what (head/tail) Karen chooses.

b. Heads, Tails.

Since Steve has a dominant strategy of choosing heads, it would be profitable to choose tail by Karen because that would give him more profit (3 > 2).

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