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GM and Chrysler both must decide whether to invest in a new process. Games 1 and 2 below show how their profits depend on the
GM and Chrysler both must decide whether to invest in a new process. Games 1 and 2 below show how their profits depend on the decision they might make.
GAME 1 | GAME 2 | ||||||
Chrysler | Chrysler | ||||||
Invest | Don't Invest | Invest | Don't Invest | ||||
GM | Invest | GM = 5 Chrysler= 5 | GM=12 Chrysler=4 | GM | Invest | GM=12 Chrysler=4 | GM =10 Crysler = 10 |
Don't Invest | GM=4 Chrysler=12 | GM = 10Chrysler = 10 | Don't Invest | GM = 5Chrysler = 5 | GM=4 Chrysler=12 | ||
a) (4) What is the Nash equilibrium from each game?
b) (6) Which of the games above (1, 2, both or neither) represents a prisoner's dilemma? Explain.
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