Consider the following two person game, between A and B.
hold Not hold
drive X, 2 3, Z
stop 10, Y 2, 6
(a.) Given an example of values for X, Y and Z so that there is a dominant strategy equilibrium.
(b.) If X = 8, Y = 4 and Z = 0, how many Nash equilibrium does the game have?
(c.) Pick values for X, Y and Z to get the most possible Nash equilibrium you can in this game. How many NE do you have and what are they?
This scenario represents the Drive or Stop options for Person A, while Person B is faced with the Hold or Not Hold options.
Hold Not Hold
Player A Drive X, 2 3, Z
Stop 10, Y 2, 6
a) In this example, I would like to create the following dominant strategies: Player B will choose Hold no matter what Player A selects (Hold is Player B's dominant strategy), and Player A will choose Drive regardless of Player B's choices (Drive is Player A's dominant strategy).
Let's start with Player B's dominant strategy. In order for this to work, this player has to generate payoffs that are higher in the Hold column than the Not Hold column. Thus, 2 has to be higher than Z, and Y has to be greater than 6.
As for ...
This solution addresses a 2x2 game theory problem and provides information on dominant strategies and Nash equilibria based on the values given. Also, an exercise is conducted when certain values in the 2x2 matrix change, leading to different Nash equilibria (optimal outcomes) for each player.