Game Theory

Assume you are in the market for a luxury car. You encounter your salesperson "Brian", who is excited to see you and help you make this important purchase. You have not decided on a new or used car at this point. Brian recommends a used car that is currently available on the lot at his dealership. You also saw a comparable model on Cars.com that was brand new at another dealership that is an hour away. As you are sitting at Brian's desk, he offers you a nice cold beverage and a snack. Although you have indicated that you may also like to go see the other car, Brian recommends running your credit to see how low of an interest rate he can get you. This seems to take some time, and at this point 2 hours has gone by. After running your credit, Brian further recommends that you speak with the finance manager about additional accessories and after-market options available. Now 4 hours has gone by and you communicate that although everything sounds really good about the car, you are concerned about the idea of buying a used car. Brian then offers to discount the extended warranty on the car by 25% in order to earn your business. It is now 30 minutes before the dealership closes.

Using the above scenario, complete the following:

A. Walk through the scenario and re-explain the scenario using game theory. Step into the shoes of each player in the game and explain how their motives and incentives structure their behavior. What might influence the payoff structure for each player given the events taking place.

B. Thinking through the attributes of cooperation, please select 2 attributes of cooperation and describe how likely the attributes might be to implement. In doing so, address the sustainability of these attributes.