Question
Two classmates, Ana and Eva, have an important Economics team assignment due tomorrow, but they also want to go to a concert tonight. They both
Two classmates, Ana and Eva, have an important Economics team assignment due tomorrow, but they also want to go to a concert tonight. They both face the choice of either working on the assignment or not working on the assignment. If at least one of the classmates works on the assignment, the assignment gets a "pass" and both students receive 7 units of happiness each, no matter who has worked on the assignment.
Each student who arrives on time at the concert receives an additional 6 units of happiness. However, each student who arrives late at the concert receives only 3 additional units of happiness. Even though both students think that solving challenging economics problems is fun, they
also really want to go to the concert. If both students work on the assignment, they will both arrive late at the concert. If only one student works on the assignment, that student will not be able to go to the concert, while the other will arrive on time at the concert. If neither
student works on the assignment, they will both arrive on time at the concert.
a) Set up the game as a simultaneous move game in normal (i.e. 2x2 table) form.
b) Are there any dominant strategies in this game? Find the Nash equilibrium (or equilibria if more than one) for this game, assuming that both
students make their decisions at the same time.
c) What is the equilibrium if Ana can play first and make a binding decision on whether or not to work on the assignment, followed by Eva observing
Ana's choice and then making her own choice about whether or not to work on the assignment? Illustrate with a game tree.
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