Answer to Question #328526 in Microeconomics for Dhuram

Question

Consider a two-player game where the player A chooses “up” or “down” and player B chooses

“left” or “right” Their payoffs are as follows: When player A chooses “up” and player B

chooses “left” they both get $3. When player A chooses “up” and player B chooses “right”

they get $2(for A) and $4(for B). When player A chooses “down” and player B chooses

“left” they get $1(for A) and $6(for B). Finally, when player A chooses “down” and player

B chooses “right” they both get $5. The two players decide simultaneously.

(a) Draw the strategic form game. Is there any dominant strategy? Justify your answer.

(b) Is there a Nash equilibrium in pure strategies? Justify your answer.

(c) Find the best response functions and the mixed strategies Nash Equilibrium if each

player randomizes over his actions.

(d) Show graphically the best response functions and the Nash Equilibria (in pure and in

mixed strategies).

Answer 1

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