Problem 3 Suppose you and your class mate have to do a group assignment. Both of you can decide to work or shirk. If you both work, then both will get a good mark but both incur the cost of working. If one person works, you get a bad mark but the person who shirked will not have to put in the effort. If both shirk then the students will get an even worse mark but do not have to put in effort. The following table represents the individuals' utilities (as always the first number is the payoff of the row player): your work shirk classmate work 4.4 5,1 shirk 1,5 2,2 d) Suppose, both students have competitive preferences and care only about how much better or worse off they are compared to the other student. In other words, u(x, y) = =x-y for both students. Show the payoff table with the psychological payoffs. What is the Nash prediction now! Discuss.

Problem 3 Suppose you and your class mate have to do a group assignment. Both of you can decide to work or shirk. If you both work, then both will get a good mark but both incur the cost of working. If one person works, you get a bad mark but the person who shirked will not have to put in the effort. If both shirk then the students will get an even worse mark but do not have to put in effort. The following table represents the individuals' utilities (as always the first number is the payoff of the row player): your work shirk classmate work 4.4 5,1 shirk 1,5 2,2 d) Suppose, both students have competitive preferences and care only about how much better or worse off they are compared to the other student. In other words, u(x, y) = =x-y for both students. Show the payoff table with the psychological payoffs. What is the Nash prediction now! Discuss.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5CQQ

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