For the following question
Consider a simultaneous move game between a union and a company.If both the parties bargain hard,each would gain nothing.If only one party bargains hard the accommodating party gets a profit of $1 million while the bargaining party gets a $5 million,while if they both accommodate,they each get $3 million.
-What would be the Nash equilibrium of this game?
A)Bargain hard,bargain hard
B)Firm bargains hard,union accommodates
C)Union bargains hard,firm accommodates
D)Both B&C

Question

​For the following question
Consider a simultaneous move game between a union and a company.If both the parties bargain hard,each would gain nothing.If only one party bargains hard the accommodating party gets a profit of $1 million while the bargaining party gets a $5 million,while if they both accommodate,they each get $3 million.
-​What would be the Nash equilibrium of this game?
A)​Bargain hard,bargain hard
B)Firm bargains hard,union accommodates
C)Union bargains hard,firm accommodates
D)​Both B&C

Quizplus · Accepted Answer

In a Nash equilibrium, no player has an incentive to deviate from their chosen strategy given the other player's strategy. In this game, if the firm chooses to bargain hard, the union's best response is to accommodate, since getting $1 million is better than getting nothing. Similarly, if the union chooses to bargain hard, the firm's best response is to accommodate for the same reason. Therefore, both choices B and C represent Nash equilibria, where only one party bargains hard and the other accommodates. However, neither party has an incentive to both bargain hard, as they would both be worse off than if they both accommodated. Therefore, the Nash equilibrium is both B and C.

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