Scenario: Roger and Billy are two colleagues who were caught by their boss for forging an important document together and have been taken to separate rooms for interrogation. They are told that if both of them confess their crime, they will be charged a fine of $2,000. If neither of them confesses, they will be fined $1,000 each. However, if one of them confesses while the other does not, the one who confesses will be set free but the other will be fined $3,000.
-Refer to the scenario above.Which of the following is true in equilibrium?

Question

Quizplus · Accepted Answer

In this scenario, both Roger and Billy have two options: to confess or not. If they both choose to not confess, they will each pay a fine of $1,000. However, if one of them decides to confess, they will be set free while the other pays a higher fine of $3,000. 
Therefore, both Roger and Billy would choose to confess in order to minimize their fine and be charged $2,000 each. This is the Nash equilibrium, where no one can improve their outcome by changing their strategy if the other player's strategy remains the same.

Scenario: Roger and Billy Are Two Colleagues Who Were Caught