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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. Their payoffs from each option are given in the payoff matrix. Suppose that Caroline and Teresa play the game over four television seasons. where each season is a new game. Consider the scenarios. Remember, a titJrtat strategy is one where the person starts by cooperating and then plays whatever strategy the other rm played last. Over four seasons. how much will Caroline make if she and Teresa both play titfortat'? Over four seasons. how much does Caroline make if she always exposes and Teresa plays titfortat'? Over four seasons. how much will Caroline make if she plays a tit-fortat strategy and Teresa always exposes? m m Over four seasons. how much will Caroline make if she plays a tit-forlat strategy and Teresa always exposes? Over four seasons. how much will Caroline make if she and Teresa both always expose? Does Caroline have a dominant strategy when she and Teresa play for four seasons? 0 No. there is no dominant strategy between tilforlat and always expose in this situation. 0 Yes, titfortat is a dominant strategy. 0 Yes, always expose is a dominant strategy. Lawn Groomer. one of a small number of lawn mower producers, is currently producing at point E. Lawn Groomer's management assumes that if the}' raise their prices, their competitors will keep their prices low to gain market share. but if Lawn Groomer lowers their prices, their competitors will also lower their prices. The graph illustrates Lawn Groomer's current price and quantity at point E. Plotted through point E are two demand curves; one is relatively elastic, and the other is relatively inelastic. Each demand curve also has its own marginal revenue (MR) curve. Merge these curves into a kinked demand curve by moving the curves' endpoints to remove the unwanted sections of the curves. Then, adjust the marginal revenue curves to properly accompany the new kinked demand curve. U 2 4 6 3 1D 12 14 1B 13 2D tililuanlityI Every three years, the Writers Guild of America renegotiates a Minimum Basic Agreement (MBA) with the Alliance of Motion Picture and Television Producers [AMPTPI The MBA includes agreements on basic compensation, salaries, royalties. etc., and ownership of original written material. In the fall of 2007, the Writers Guild and AMPTP were embroiled in an intense negotiation, mainly disagreeing on how writers are compensated for digital media work such as web series and onlineonly content. The given payoff matrix contains the strategies and outcomes of each party in the negotiation. They could either compromise (C) or hold rm [I-EF) on their issues. If both parties hold rm, the Writers Guild will go on strike. The rst number in each box is the Writers Guild's payoff and the second number is AMPI'P's payoff. Assume that strategies are chosen independently and simultaneously. AM m 0,0 Compromise 3 , 10 S , 5 Hold rm 10,3 Writers Guild What are the Nash equilibria'? \\:I Writers Guild holds rm and AMPTP holds rm |:I Writers Guild compromises and AMFI'P compromises \\:I Writers Guild holds rm and AMPTP compromises |:| Writers Guild compromises and AMPTP holds rm This is an example of thel . I . chicken game prisoners' dilemma centipede game ultimatum game