Question

What is the Nash equilibrium for the following,where each player has another strategy named match it which allows the person to choose this to reduce tariff only if the other person chooses it too:

1/2 Keep No tariff Match It

Keep 10,10 15, 5 10,10

No Tariff 5,15 14,14 14,14

Match It 10,10 14,14 14,14

Answer 1

In above game we have 2 Nash Equilibria

Best response of Player 1 for Payer 2's strategy Keep is Keep

Best response of Player 1 for Payer 2's strategy No Tariff is Keep

Best response of Player 1 for Payer 2's strategy Match It is Either No tariff or Match it

Best response of Player 2 for Payer 1's strategy Keep is Keep

Best response of Player 2 for Payer 1's strategy No Tariff is Keep

Best response of Player 2 for Payer 1's strategy Match It is Either No tariff or Match it

Therefore NE are

(Keep, Keep) and (Match It, Match It)