Scenarie 17-3 Updates R Some apps Consider two countrics, Kinglandia and Rovinas

Question

Scenarie 17-3 Updates R Some apps Consider two countrics, Kinglandia and Rovinastan, that are engagod in an arms race Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe froen the other country's weapons. The following table shows the possible outcomes for each decision combination. The numsbers in cach cell ropresent the country's ranking of the outcomse (10-best outcome, 1 - worst outcome). Rovinastan Build new weapons Dirarm exisring weapon Baild new weanons Kinglandia: 4 Revinastan: 4 Kinglandia: 10 Rovinastam: 1 Kinglandia Kinglandia: 8 Rovinastan: 8 Disarm existing Kinglandia: 1 tovinastan: 10 Refer to Scenarie 17-3. Which of these statements is coereet? Kinglandia is better off building new wcapons if Rovinastan builds new weapons. (ii) Kinglandia is better off building new weapons if Rovinastan disarms existing weapons. (i) Rovinastan is only better off bailding new weapons if Kinglandia builds new weapons i) and () (ia) and (ii) ) and il) and (i)

Explanation / Answer

Let us evaluate each statement -

(i) If Rovinastan builds new weapons, then Kinglandia gets a higher payoff from building new weapons (4>1).
(ii) If Rovinastan disarms existing weapons, then Kinglandia gets a higher payoff by building new weapons (since 10>8)
(iii) If Kinglandia builds new weapons, then Rovinastan gets a higher payoff from building new weapons (4>1).

We notice that all three statements are true. Hence option 4 is correct.

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