In: Economics
Answer to the first question:
1. Suppose player 1 is the row player and player 2 is the column player. Let player 2 play X with probability p and play Y with probability (1 - p).
So when player 1 plays X, he gets 0 with probability p and 1 with probability (1 - p). When player 1 plays Y, he gets 4 with probability p and 0 with probability (1 - p).
Therefore, ( 0*p)+1(1-p) = (4*p) + 0(1-p)
Or, 0 + 1 - p = 4p + 0
Or, 5p = 1
Or, p = (1/5)
Therefore, (1-p) = (4/5)
Now suppose, player 1 plays X with probability q and plays Y with probability (1-q).
Therefore, if player 2 plays X, it gets 0 with probability q and 1 with probability (1 -q). If player 2 plays Y, it gets 4 with probability q and 0 with probability (1 - q).
Therefore, (0*q) + 1(1-q) = 4q + 0(1-q)
Or, 1 - q = 4q
Or, 5q = 1
Or, q = (1/5)
Therefore, (1 - q) = (4/5)
Answer: The probability of X is (1/5).
2. The mixed strategy Nash equilibrium is (1/5 , 4/5), (1/5 , 4/5).