Game Theory

1. One Shot Game:In a two-player, simultaneous-move game each player can choose Strategy A or

Strategy B.If both players choose Strategy A, each earns a payout of $500.If both players choose Strategy B,

each earns a payoff of $100.If Player 1 chooses Strategy A and Player 2 chooses Strategy B, then Player 1

earns $0 and Player 2 earns $650.If Player 1 chooses Strategy B and Player 2 chooses Strategy A, then Player

1 earns $650 and Player 2 earns $0.

a. Write the above game in normal form.

b. Find each player's dominant strategy, if it exists.

c. Find the Nash equilibrium (or equilibria) of this game.

d. Rank strategy pairs by aggregate payout (total payout to both players) from highest to lowest.

e. Can the outcome with the highest aggregate payout be sustained in equilibrium?Explain why or why not.