Asked by Gabriel Barrowman on Apr 25, 2024
Verified
What would be the Nash equilibrium of this game?
A) Bargain hard,bargain hard
B) Firm bargains hard,union accommodates
C) Union bargains hard,firm accommodates
D) Both B&C
Nash Equilibrium
The point in a game where each player's strategy is optimal given the strategies of all other players, with no incentive to deviate.
Simultaneous Move Game
A type of strategic game in which all players make their decisions at the same time, without knowledge of the other players' choices.
Bargain Hard
Bargain hard refers to the act of negotiating with determination and strategy to achieve the most advantageous terms possible in a deal or transaction.
- Acquire knowledge about the Nash equilibrium and evaluate its utility in bargaining scenarios.
Verified Answer
JM
Joharah Marie Lualhati7 days ago
Final Answer :
D
Explanation :
In a Nash equilibrium, no player has an incentive to deviate from their chosen strategy given the other player's strategy. In this game, if the firm chooses to bargain hard, the union's best response is to accommodate, since getting $1 million is better than getting nothing. Similarly, if the union chooses to bargain hard, the firm's best response is to accommodate for the same reason. Therefore, both choices B and C represent Nash equilibria, where only one party bargains hard and the other accommodates. However, neither party has an incentive to both bargain hard, as they would both be worse off than if they both accommodated. Therefore, the Nash equilibrium is both B and C.
Learning Objectives
- Acquire knowledge about the Nash equilibrium and evaluate its utility in bargaining scenarios.