Use the following to answer question
Sam and Sarah are thinking about getting married.However if either of them cheats on the other,they would get a payoff of 10,while the other person gets zero.If neither cheat,they stay with each other and get a payoff of 7 each and if both cheat,the relationship falls apart and each get a payoff of 1.
-The equilibrium of this game indicates
A)Self-interest can sometimes lead to sub-optimal outcomes
B)Rationality can sometimes lead to inefficient outcomes
C)All of the above
D)None of the above

Question

​Use the following to answer question
​Sam and Sarah are thinking about getting married.However if either of them cheats on the other,they would get a payoff of 10,while the other person gets zero.If neither cheat,they stay with each other and get a payoff of 7 each and if both cheat,the relationship falls apart and each get a payoff of 1.
-​The equilibrium of this game indicates
A)​Self-interest can sometimes lead to sub-optimal outcomes
B)Rationality can sometimes lead to inefficient outcomes
C)All of the above
D)​None of the above

Quizplus · Accepted Answer

The equilibrium of this game, where both may choose to cheat to avoid being the one left with nothing, demonstrates that self-interest and rationality can lead to sub-optimal outcomes (each getting a payoff of 1) compared to if neither cheated (each getting a payoff of 7).

​Use the Following to Answer Question

Use the Following to Answer Question