Suppose that you are a manager.You are considering whether or not to monitor employees with the payoffs in the normal-form game shown below. $\begin{array}{c}
\text { Worker }\
\text { Manager}
\begin{array}{|l|l|l|}
\hline & \text { Work } & \text { Shirk } \
\hline & & \
\text { Monitor } & -1,1 & 1,-1 \
\hline \text { Don't } \
\text { Monitor }& 1,-1 & -1,1\
\hline
\end{array}\end{array}$ Which of the following pairs of strategies constitutes a Nash equilibrium?
A) Manager monitors and worker works.
B) Manager does not monitor and worker works.
C) Manager monitors and worker shirks.
D) None of the preceding answers is correct.

Question

Suppose that you are a manager.You are considering whether or not to monitor employees with the payoffs in the normal-form game shown below. $\begin{array}{c}
\text { Worker }\
\text { Manager}
\begin{array}{|l|l|l|} 
\hline & \text { Work } & \text { Shirk } \
\hline & & \
\text { Monitor } & -1,1 & 1,-1 \
\hline \text { Don't } \
\text { Monitor }& 1,-1 &  -1,1\
\hline
\end{array}\end{array}$ Which of the following pairs of strategies constitutes a Nash equilibrium?
A) Manager monitors and worker works.
B) Manager does not monitor and worker works.
C) Manager monitors and worker shirks.
D) None of the preceding answers is correct.

Quizplus · Accepted Answer

There is no dominant strategy for either player in this game. If the manager monitors, the best response for the worker is to shirk, but if the manager doesn't monitor, the best response for the worker is to work. Similarly, if the worker works, the best response for the manager is to monitor, but if the worker shirks, the best response for the manager is not to monitor. Therefore, there is no pair of strategies that constitutes a Nash equilibrium. The outcome of the game will depend on the players' beliefs about each other's actions and their willingness to take risks, which cannot be determined from the information given.

Suppose That You Are a Manager Which of the Following Pairs of Strategies Constitutes a Nash