Asma has a credit card account with Bank Muscat. The bank is considering whether to raise Asma’s credit card interest rate. Asma can respond by moving to National bank of Oman (NBO) or do nothing. If Bank Muscat raises Asma’s interest rate and Asma does nothing, then Bank Muscat increases profit by 300 OMR while Asma receives -300 OMR. If Bank Muscat raises Asma’s interest rate and Asma transfers her account to NBO then Bank Muscat receives -150 and Asma receives 100 OMR. If Bank Muscat does nothing and Asma does nothing, then both gets 0 OMR. If Bank Muscat does nothing and Asma transfer her account to NBO then Bank Muscat receives -150 while Asma receives -75 OMR. Draw the game with the help of a tree chart. If you are a bank manager of the Bank Muscat, then what is the best strategy for you. What is the best strategy if you are helping Asma with her decision?

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.8P
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Asma has a credit card account with Bank Muscat. The bank is considering whether to raise Asma’s credit card interest rate. Asma can respond by moving to National bank of Oman (NBO) or do nothing. If Bank Muscat raises Asma’s interest rate and Asma does nothing, then Bank Muscat increases profit by 300 OMR while Asma receives -300 OMR. If Bank Muscat raises Asma’s interest rate and Asma transfers her account to NBO then Bank Muscat receives -150 and Asma receives 100 OMR. If Bank Muscat does nothing and Asma does nothing, then both gets 0 OMR. If Bank Muscat does nothing and Asma transfer her account to NBO then Bank Muscat receives -150 while Asma receives -75 OMR.

  1. Draw the game with the help of a tree chart.
  2. If you are a bank manager of the Bank Muscat, then what is the best strategy for you.
  3. What is the best strategy if you are helping Asma with her decision?
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