2. In a two-player, one-shot, simultaneous-move game, each player can choose
strategy A or strategy B. If both players choose strategy A, each earns a payoff
of $400. If both players choose strategy B, each earns a payoff of $200. If
player 1 chooses strategy A and player 2 chooses strategy B, then player 1
earns $100 and player 2 earns $600. If player 1 chooses strategy B and player
2 chooses strategy A, then player 1 earns $600 and player 2 earns $100.
a. Write the above game in normal form.
b. Find each playerâs dominant strategy, if it exists.
c. Find the Nash equilibrium (or equilibria) of this game.
d. Rank strategy pairs by aggregate payoff (highest to lowest).
e. Can the outcome with the highest aggregate payoff be sustained in equilibrium? Why or why not?
Suppose a UAW labor contract with General Dynamics is being renegotiated.
Some of the many issues on the table include job security, health benefits, and
wages. If you are an executive in charge of human resource issues at General
Dynamics, would you be better off (a) letting the union bear the expense of
crafting a document summarizing its desired compensation, or (b) making the
union a take-it-or-leave-it offer? Explain.