Question
Barry has a company that makes tea. His only customer is Andrew. Barry has to decide whether to make his tea good or bad. Good
Barry has a company that makes tea. His only customer is Andrew. Barry has to decide whether to make his tea good or bad. Good tea is more expensive to make. Andrew has to decide whether to buy one or two bottles. All the bottles in a given production run are of the same quality. Andrew cannot tell the quality of the tea when he decides how much to buy, but he does discover the quality later once he drinks it. Andrew's payoff is 3 if he buys two bottles of tea and it is good; 2 if he buys one bottle and it is good; 1 if he buys one bottle and it is bad; and 0 if he buys two bottles and it is bad. Barry's payoff is: 3 if he makes bad tea and sells two bottles; 2 if he makes good tea and sells two bottles; 1 if he makes bad tea and sells one bottle; and 0 if he makes good tea and sells one bottle. Write down the game table for this game and find the Nash equilibrium.
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