Political Economy

        Assignment 1

Q1.

A nash equilibria is a point in the game where each player chooses the strategy that maximizes his expected payoff given the strategies chosen by other players, no one has an incentive to deviate.

Here pure strategy nash equilibria is for Player 1 to choose U and for Player 2 is L (3;4).  For Player 1, it is better to choose U with a payoff of 3 rather than 2 when he chooses D. Similarly, selecting L with a payoff of 4 is better for Player 2 rather than choosing R with payoff of 1. Therefore, these are the best outcomes for both players in a given options.

In this game the nash equilibria is the same as before. It is the best option to choose U for Player 1 with a payoff of 3 it will be irrational if he chooses D with a payoff of 2, as it is less than 3. For Player 2, L with a payoff of 4 is the best choice to get the maximum payoff. The nash equilibria has not changed because we do not have any choice for both players with a better payoffs.

Q2.