would it be -3? if not, how do i find it? game theory What is the social welfare of the (pure) Nashequilibrium in the Prisoner's Dilemma game?Player 2Player 1b-1,-1-3, 00, -3 -2, -2O-1O-2-4O -5

"Nash equilibrium represent the optimal choice of players such that no player have an incentive to…

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Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

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would it be -3? if not, how do i find it? game theory

What is the social welfare of the (pure) Nash
equilibrium in the Prisoner's Dilemma game?
Player 2
Player 1
b
-1,-1
-3, 0
0, -3 -2, -2
O-1
O-2
-4
O -5

Definition Definition Economic decision-making framework that analyzes how different players optimize their outcomes with given pay-offs corresponding to their available strategies. The assumptions of game theory are: The number of players or competitors are finite/limited; All participants are rational The rules of the game are known to every player; and Each participant has a finite set of actions. A common way in which game theory is presented as an ( m x n ) matrix in which m represents the strategies of row player and n represents the strategies of column player. There are several limitations of game theory: Many businesses have a large number of competitors, and selecting an optimal strategy in these circumstances is difficult; Real-life business operating environments are full of uncertainty and difficult to model as a game theory; and The assumption of rationality and utility maximization isn't always an accurate portrayal of human nature.

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