Post by: Mscarter on Nov 23, 2022
You are playing a game with another person in which you build up a fund of $44,500. To decide how to divide the funds between you, you and the other person get to make a choice.
• If you both choose friend, you divide the fund equally between you.
• If one person chooses friend and the other person chooses foe, the person who chose foe gets the entire fund. The person who chose friend gets nothing.
• If you both choose foe, you both get nothing.
What is your best strategy? Suppose an additional penalty of $11,125 is imposed on whoever chooses foe. What is the best strategy?
◦ Choose foe, choose foe
◦ Choose friend, there is none
◦ Choose friend, choose friend
◦ Choose foe, there is none
Post by: khudija on Nov 23, 2022
To determine what action to take, first construct a payoff matrix.
| | | You | |
| Them | | Friend | Foe |
| | Friend | You: $22,250 Them: $22,250 | You: $44,500 Them: $0 |
| | Foe | You: $0 Them: $44,500 | You: $0 Them: $0 |
Your actions:
Assuming they choose friend, you can maximize your payoff by choosing foe ($44,500 versus $22,250).
Assuming they choose foe, you get the same amount whether you choose friend or foe ($0 versus $0).
Therefore, your best strategy is to choose foe in hopes that they choose friend.
With the additional penalty of $11,125 imposed on whoever chooses foe, the payoff matrix is updated:
| | | You | |
| Them | | Friend | Foe |
| | Friend | You: $22,250 Them: $22,250 | You: $44,500 - 11,125 = $33,375 Them: $0 |
| | Foe | You: $0 Them: $44,500 - 11,125 = $33,375 | You: $0 - 11,125 = -$11,125 Them: $0 - 11,125 = -$11,125 |
Your actions:
Assuming they choose friend, you can maximize your payoff by choosing foe ($33,375 versus $22,250).
Assuming they choose foe, you can maximize your payoff by choosing friend ($0 versus
).There is no best strategy in this example.