4. In studying for your economics final, you are concerned about only two things: your grade and the amount of time you spend studying. A good grade will give you a benefit of 20; an average grade, a benefit of 5; and a poor grade, a benefit of 0. By studying a lot, you will incur a cost of 10; by studying a little, a cost of 6. Moreover, if you study a lot and all other students study a little, you will get a good grade and they will get poor ones. But if they study a lot and you study a little, they will get good grades and you will get a poor one. Finally, if you and all other students study the same amount of time, everyone will get average grades. Other students share your preferences regarding grades and study time. (LO2)

a. Model this situation as a two-person prisoner’s dilemma in which the strategies are to study a little and to study a lot, and the players are you and all other students. Construct a payoff matrix in which the payoffs account for both the cost and benefit of studying.

b. What is the equilibrium outcome in this game? Which outcome would everyone (both the other students and you) prefer?