4. Consider the following two games, Game 1 and Game 2, illustrated below: Game

Question

4. Consider the following two games, Game 1 and Game 2, illustrated below: Game 1: Column Left 1,1 0, 1 Right 1,0 4, 4 Top Bottom Row Game 2 Column Right Left 1,1 0, 5 5, 0 Top Bottom Row 4, 4 a) Identify which game is a prisoners' dilemma game and which is a stag hunt (assurance) b) c) d) game. Explain. For each game, identify any dominant strategy for Row and for Column. For each game, identify any Nash equilibrium outcome. Explain the main differences between the two games and their implication on players' behaviors.

Explanation / Answer

a..)

Game 1: it is an example of stag hunt game. Here, profit can be maximized but both participants tend to move towards the safety. Thus both end up getting lesser profit.

Game2: It is an example of prisoner dilemma. Both participants do not cooperate here as well, instead there is tendency t cheat.

b)

Game 1 does not have dominant strategy.

Game 2 has dominant strategy, Left and Top are dominant strategies for Row and column. (1,5) > (0,4)

c)

Game 1: Nash equilibrium (Top , Left)

Game 2: Nash Equilibrium (Top, Left)

d)

In first game, participants do not cheat each other and look for safety but in second game, participants have tendencies to cheat each other.

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