Question

In: Economics

Create a prisoner's dilema table. Then use a prisoner’s dilemma to show how hoarding behavior can...

  1. Create a prisoner's dilema table. Then use a prisoner’s dilemma to show how hoarding behavior can arise as an equilibrium when an emergency is expected. Explain why you chose the payoffs the way you did.

Solutions

Expert Solution

Prisoner 1   has to build a belief about what choice Prisoner 2 is going to make, in order to choose the best strategy. If Prisoner 2 confesses, he will get either -8 or 0, and if he lies   he will get either -10 or -1.

It can be easily seen that Prisoner 2 will choose to confess, since he will be better off. Therefore, Prisoner 1 must choose the best strategy given that Prisoner 2 will choose to confess.

Prisoner 1 can either confess (Prisoner 1 confess, which pays -8) or lie (Prisoner 1 lie, which pays -10).

The rational thing to do for Prisoner 1 is to confess. Proceeding inversely, we analyze the beliefs of Prisoner 2 about Prisoner 1’s strategies, which gets us to the same point: the rational thing to do for Prisoner 2 is to confess. Therefore, [Prisoner 1confess, Prisoner 2 confess] is the Nash equilibrium in this game (UNDERLINED -8-8).

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Show how the Prisoner’s Dilemma led to massive doping in international track and field. What can...
Show how the Prisoner’s Dilemma led to massive doping in international track and field. What can authorities do to prevent doping from becoming a dominant strategy?
Show how the Prisoner’s Dilemma led to massive doping in international track and field. What can...
Show how the Prisoner’s Dilemma led to massive doping in international track and field. What can authorities do to prevent doping from becoming a dominant strategy?
How can prisoner’s dilemma be used to explain international relations?
How can prisoner’s dilemma be used to explain international relations?
Describe how the prisoner's dilemma can be converted into a business strategy context, e.g. in a...
Describe how the prisoner's dilemma can be converted into a business strategy context, e.g. in a pricing game where the strategy is increase price or leave price unchanged or the decision to enter or not enter a market.
Explain the Prisoner’s Dilemma. Give a numerical example and show how each player would make decisions.
Explain the Prisoner’s Dilemma. Give a numerical example and show how each player would make decisions.
Use your understanding of game theory and the Prisoner's Dilemma to explain the logic of multilateral...
Use your understanding of game theory and the Prisoner's Dilemma to explain the logic of multilateral trade agreements
Give an example of a real world issue that can be explained using the prisoner's dilemma...
Give an example of a real world issue that can be explained using the prisoner's dilemma game. Specify the players in the game, the actions available to them and the payoff to the players in the game given outcome. Explain how the incentives for the players are similar to that of the prisoners in the prisoner's dilemma.
In the novel how the markets fail by John Cassidy, Explain how the prisoner’s dilemma works?...
In the novel how the markets fail by John Cassidy, Explain how the prisoner’s dilemma works? How is it an example of market failure?
In the novel how the markets fail by John Cassidy, Explain how the prisoner’s dilemma works?...
In the novel how the markets fail by John Cassidy, Explain how the prisoner’s dilemma works? How is it an example of market failure?
How does the Prisoner's Dilemma relate to oligopolies? How does game theory (and the likely actions...
How does the Prisoner's Dilemma relate to oligopolies? How does game theory (and the likely actions by the "players") change if the game is only played once as opposed to it being an on-going game?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT