New One Goal, Three Exams: Strategies for Mastering RBI, SEBI, and IFSCA Exams
Register

Question

Consider a bargaining game:

Find pure strategy Nash equilibrium.

A {low, yes} Correct Answer Incorrect Answer
B {low, low} Correct Answer Incorrect Answer
C {yes, yes} Correct Answer Incorrect Answer
D {yes, low} Correct Answer Incorrect Answer
E Doesn’t exist Correct Answer Incorrect Answer

Solution

Suppose 1 chooses “low” then best response of 2 will be to choose “yes”. Now consider the other way round if 2 chooses “yes” then 1’s best response will be “low”. So neither of two would want to deviate. Applying the same logic to other points we deduce {low, yes} is the only Nash Equilibrium.

Practice Next
×
×