In: Economics
Suppose all the students in a class are asked to choose between α and β simultaneously. If a student chooses “β” he/she immediately gets B +. If the student chooses “α”, then his/her payoff depends on the choices made by the other students. If at least 90% students choose α, then all of those who chose α get A, otherwise they get F. Find the nash equilibrium
This can be simplified to form a two player game with both players having the choices and
The payoffs are shown in the table below:
Player 1/2 | α | β |
α | A,A | F,B+ |
β | B+,F | B+,B+ |
There are two Nash Equilibria in this game,
1. Both players choose and get a payoff of B+ each.
2. Both players choose and get a payoff of A each.
Because of the higher payoff, both players will choose
This can be extended to the given game since if at least 90% students choose , then all those who choose get A. There is no incentive to choose as choosing only reduces the payoff of all students.