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Question 4. Fill in the following payoff matrix to produce a game in which (A, X) and (B, Y ) are the only Nash Equilibrium.

          Question 4. Fill in the following payoff matrix to produce a game in which (A, X) and (B, Y ) are the
only Nash Equilibrium.
        

Added by Blanca H.

Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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Question 4. Fill in the following payoff matrix to produce a game in which (A, X) and (B, Y ) are the only Nash Equilibrium.
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Transcript

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00:01 So we have this game matrix here and we'd like to find the nash equilibrium and pareto efficient points.
00:07 We go through this here.
00:10 First of all, let's assume that player 2 is going to pick right.
00:16 So player 1 can either pick between getting 0 value or 2 value.
00:22 Well in this case they're going to pick to play down so they can get their value of 2.
00:31 Conversely, if we know that player 2 is going to pick left then it's still in player 1's interest to pick down.
00:40 So no matter what player 1 is going to pick down we can ignore this whole upper thing and we see player 2 now is very much incentivized to pick right because their options are either getting 0 value or 2 value in the same way...
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