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1. Suppose two competing companies are deciding what strategy they should take in hiring highly-skilled workers from an identical pool of applicants. Company X has
1. Suppose two competing companies are deciding what strategy they should take in hiring highly-skilled workers from an identical pool of applicants. Company X has a choice of two strategies, A (offer its workers the fair market rate) and B (overpay its workers). Similarly, Company Y has a choice of two strategies, C (offer its workers the fair market rate) and D (overpay its workers). According to game theory, the payoffs for each of these strategies can be quantified. The following is the payoff matrix for the game played by Companies X and Y. Company Y C D CompanyX ~ A[ LT [ 22 B[22 a) Is this a zero-sum or a non-zero-sum game? How do you know? b) Does Company X have an inferior strategy? If so, which strategy is it? ) Does Company Y have a dominant strategy? If so, which strategy is it? d) What is the name ordinarily given to games of the type depicted in the payoff matrix? e) Isthere a \"cooperative\" strategy that X can play in the game depicted in the matrix? If so, which strategy is it? f) Experiments have been run with games of the type depicted in the matrix. In some experiments the players are not allowed to communicate with each other; without communication they simultaneously select the strategies they wish to play. In other experiments, the players are allowed to communicate each other. After a period of communication, the players simultaneously select the strategies they wish to play. Discuss the effect (if any) of communication on the players' choice of strategies in experiments of this sort. Use examples from class and/or your own experiences
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