Question
Michael and Scott are deciding how much time to study for the final exam. If they do not study, they will both get 80%
Michael and Scott are deciding how much time to study for the final exam. If they do not study, they will both get 80% on the exam, curved up to 92%. If they study, they will get 95%, curved up to 100%. (Notice the curve is much steeper if they do NOT study.) Studying is costly. They both would be willing to pay $10 if they did not have to study. They are also willing to pay $1 per percentage point (e.g., $90 for a 90%). If Michael studies and Scott does not, Michael gets a 95% (curved up to 105%) and Scott gets 75% (curved up to 85%), and vice versa. a. Depict this scenario in game theoretic form. b. Find the Nash equilibrium. c. Is this a prisoner's dilemma? Why?
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
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