Suppose that Teresa and Caroline are both in the public eye. They get offers to sell secrets of the other to tabloids. If both keep the secrets, they are both better off than if they get exposed. If only one is exposed, the other person is better off than if no one was exposed. Thier payoffs from each option are given in the payoff matrix below. ?Scroll down to see the rest of the question.?

Suppose that Caroline and Teresa play the game over 4 television seasons (each season is a new game). Consider the following scenarios. Remember, a tit-for-tat strategy is one where the person starts by cooperating and then plays whatever strategy the other firm played last.

Over four seasons, how much will Caroline make if she and Teresa both play tit-for-tat? Number ____

Over four seasons, how much does Caroline make if she always exposes and Teresa plays tit-for-tat? Number __________

Over four seasons, how much will Caroline make if she plays a tit-for-tat strategy and Teresa always exposes? Number ________

Over four seasons, how much will Caroline make if she and Teresa both always expose? Number ________

Does Caroline have a dominant strategy when she and Teresa play for 4 seasons? (Solve for the quantities to the right first).

No, there is no dominant strategy between

• Tit-for-tat and always expose in this situation.
• Yes, tit-for-tat is a dominant strategy.
• Yes, always expose is a dominant strategy.

Caroline EXPOSE e XOOP K Expose Secrets Keep Secrets 50 2 5 Teresa 10 10 8 2 8