Question

Question 1

Harrison and Tyler are two students who met by chance the last day of exams before the end of the spring semester and the beginning of summer. Fortunately, they liked each other very much. Unfortunately, they forgot to exchange addresses. Fortunately, each remembers that they spoke of attending a campus party that night. Unfortunately, there are two such parties. One party is small. If each attends this party, they will certainly meet. The other party is huge. If each attends this one, there is a chance they will not meet because of the crowd. Of course, they will certainly not meet if they attend separate parties. Payoffs to each, depending on the combined choice of parties, are shown below, with Tyler’s payoffs listed first.

Harrison

Go To Small Party Go To Large Party

Tyler Go To Small Party 1,000, 1,000 0, 0

Go To Large Party 0, 0 500, 500

a. Identify the Nash equilibria for this problem.

b. Identify the Pareto optimal outcome for this ‘2 party’ system.

Answer 1

Solution:-