Business

Huggie

3 January, 10:51

7. Solving for dominant strategies and the Nash equilibrium

Suppose Larry and Megan are playing a game in which both must simultaneously choose the action Left or Right. The payoff matrix that follows shows the payoff each person will earn as a function of both of their choices. For example, the lower-right cell shows that if Larry chooses Right and Megan chooses Right, Larry will receive a payoff of 5 and Megan will receive a payoff of 5.

The only dominant strategy in this game is for to choose.

The outcome reflecting the unique Nash equilibrium in this game is as follows: Larry chooses and Megan chooses.