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    Nash Equilibrium (Pure Strategy) and Prisoner's Dilemma

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    Below is a payoff matrix for Intel and AMD. In each cell, the first number refers to AMD's profit, while the second is Intel's.
    a. Is there a Nash Equilibrium(s)? Why or why not?
    b. Is this an example of the Prisoner's Dilemma? Why or why not?

    AMD Lower Price Same Price Higher Price
    Lower Price -2, -6 6, -2 12,-15
    Same Price 6,14 9, 8 15, 4
    Higher Price -13,7 3, 9 16,20

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    Solution Preview

    Nash equilibrium can be defined as set of strategies from which no player has incentive to unilaterally change its action because doing so would reduce the player's earnings.

    In the payoff matrix below, each cell is in format AMD's Payoff , Intel's Payoff
    Hence, in first cell of the Payoff Matrix, [-2,-6], -2 represents AMD's Payoff and -6 represents Intel's Payoff

    AMD Lower Price (L) Same Price (S) Higher Price (H)
    Lower Price (L) ...

    Solution Summary

    Solution assumes pure strategy Nash Equilibrium. It provides step by step explanation of Nash Equilibrium then moves on to Prisoner's Dilemma establishing relation between the two along with the example.