
-Consider the Cold War game depicted in Figure 3.6 involving a first and second strike nuclear strategies where !4 represents total annihilation, !L represents significant but "acceptable" losses, and GUS and GSU represent positive gains to the U.S. and the Soviet Union, respectively. The strategy profile:
A) {First strike, First strike} constitutes a Nash equilibrium because neither player can improve its payoff by switching strategies.
B) {Second strike, Second strike} constitutes a Nash equilibrium because neither player can improve its payoff by switching strategies.
C) {First strike, First strike} is a Nash equilibrium because both players have a strictly dominant strategy.
D) Both a and b are correct.
E) None of the above are correct.
Correct Answer:
Verified