Players A and B are playing a simultaneous moves game and both can choose either strategy S1 or strategy S2. If both choose S1 both receive 0. If both choose S2 both receive -2. If their chosen strategies differ they both receive -4.
(a)Write out a table representing each player¡¦s strategies and payoffs (payoff matrix).
(b)State the set of strategy profiles.
(c)Suppose player A plays S1. What is B¡¦s best response?
(d)Suppose player B plays S2. What is A¡¦s best response?
(e)Does A have a dominant strategy?
(f)Is there a unique outcome by elimination of dominated strategies?
(g)What is (or are) the pure strategy NE to this game?
(h)Explain precisely why it is the NE (if more NE just pick one of them). Pick one strategy profile that is NOT a NE and explain precisely why.
(i)Which of the NE do you find most likely to prevail in the real world. Why? What about if the game was played repeatedly?