Rachel and Laura are engaged in a game of chicken. In this game, each person drives her car start towards the other person and the person who swerves first is the loser. Consider the initial game to be simultaneous. The game box is detailed below. If one person swerves and the other drives straight, the loser must pay the winner $1000. If both drive straight they crash their cars resulting in $10,000 worth of repairs to each vehicle plus another $20,000 worth of medical bills. If they both swerve, nothing is gained or lost.

Laura

Swerve Drive Straight Rachel Swerve 0, 0 -$1000, $1000 Drive Straight $1000, -$1000 -$30,000, -$30,000

Understanding the game: a. What does Rachel want to do if Laura is going to swerve? b. What does Rachel want to do if Laura is going to drives straight? c. What does Laura want to do if Rachel is going to swerve? d. What does Laura want to do if Rachel is going to drive straight? Understanding dominance: e. Do Rachel and/or Laura have a dominant strategy? If yes, then list all dominant strategies. Application:

f. In this game, an advantage can be wrought if you have the first mover advantage. For example, Rachel - a learned scholar in these games - decides to publicly disable her steering wheel right before they start driving...Rachel no longer has the ability to swerve because her steering is disabled. What will be the result?