Purchase Solution

Nash equilbrium & Prisoner Dilemma

Not what you're looking for?

Ask Custom Question

1. Consider the following information, and answer the question below. China and England are international trade partners. The following data are expected payoffs for the two countries.

Both China and England use a tariff; payoff equals -25 for both nations.
Both China and England allow free trade; payoff equals 25 for both nations.
China uses a tariff, but England allows free trade; payoff is 45 for China and -10 for England.
England uses a tariff, but China allows free trade; payoff is 45 for England and -10 for China.

Which situation represents a Nash equilibrium, or the situation that occurs when both nations attempt to do what is in the best interest of each other, exclusively?
a.Both China and England allow free trade.
b.England uses a tariff, but China allows free trade
c.China uses a tariff, but England allows free trade
d.Both nations impose a tariff

2. Describe the prisonerâ??s dilemma. Provide a numerical example using China and Mexico as the two countries, and use producing or not producing steel components as the two options facing each nation.

Purchase this Solution

Solution Summary

Nash equilbrium & Prisoner Dilemma

Solution Preview

1. We draw the payoff matrix for the two countries,

England
Tariff No Tariff

T -25, -25 45, -10
China

NT -10, 45 25, 25

The Nash Equilibria here are (Tariff, No Tariff), and (No Tariff, Tariff), which corresponds with choice b and c.

Why are these Nash Equilibria? We will look at (Tariff, No Tariff). Suppose (Tariff, No Tariff) was played, can either ...

Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.