Question

You and a classmate are assigned a project on which you will receive one combined grade. You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation:

•	If both of you work hard, you both get an A, which gives each of you 40 units of happiness.
•	If only one of you works hard, you both get a B, which gives each of you 30 units of happiness.
•	If neither of you works hard, you both get a D, which gives each of you 10 units of happiness.
•	Working hard costs 25 units of happiness.

Complete the following payoff matrix given the previous information. In each cell, your classmate's payoff is on the left and yours is on the right.

Your Decision

Work

Shirk

Classmate's Decision

Work

,

,

Shirk

,

,

The likely outcome is that your classmate   and you   .

If you get this classmate as your partner on a series of projects throughout the year, rather than only once, you are   likely to engage in cooperation.

Another classmate cares more about good grades: He gets 50 units of happiness for a B and 80 units of happiness for an A.

Complete the following payoff matrix, assuming you have this classmate as a partner.

		Your Decision
		Work	Shirk
Classmate's Decision	Work	,	,
	Shirk	,	, The likely outcome in this case is that your classmate   and you   . You would prefer the   classmate as a partner, and he   want you as a partner.

Answer 1

Matrix

You, classmate	Work	Shirk
Work	A (15,15)	B, (5,30•)
Shirk	B (30*,5)	D (10*,10•)

If both work hard, each gets = (40-25)= 15

If only one works hard, he gets = (30-25)= 5, other gets 30

B)• each has dominant strategy : shirk

so likely  outcome : both will Shirk..

C) if both meet for a long period , then both could show cooperation, so both could decide to work hard, & get higher payoff of 15, instead of 10

New matrix

new classmate

you, classmate	Work	Shirk
Work	(15, 65•)	(5,50)
Shirk	(30*, 25•)	(10*,10)

D) new NE : you will Shirk & classmate will work

So higher payoff with new classmate & so

you prefer this one as partner