Payoff Matrix - Nash Equilibria
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In the following payoff matrix, Player A announces that she will cooperate.
Player B
Defect Cooperate
A: -1 A: 0.5
B:2 B:1
Cooperate
Player A
A:0 A:1
Defect B:0.5 B: -1
a. How is this likely to change the outcome?
b. What does your answer to a suggest about the value of cheap talk?
c. How could Player A maker her pronouncement believable?
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a. B's dominant strategy is to Defect as the payout for that is more than the payout for the respective payouts to Cooperate. A's dominant strategy is to defect as well as ...
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