Refer to the payoff matrix below. Which of the following pairs of strategies constitutes a Nash equilibrium of the game?
A) S1, t1
B) S1, t2
C) S2, t1
D) S1, t2 and S2, t1

Question

Refer to the payoff matrix below.  Which of the following pairs of strategies constitutes a Nash equilibrium of the game?
A) S1, t1 
B) S1, t2 
C) S2, t1 
D) S1, t2 and S2, t1

Quizplus · Accepted Answer

In a Nash equilibrium, no player has an incentive to change their strategy given the strategy of the other player. Here, if player 1 chooses S1, player 2 is better off choosing t2 rather than t1 (2 > 1). Similarly, if player 1 chooses S2, player 2 is still better off choosing t1 rather than t2 (3 > 1). Therefore, the Nash equilibrium consists of player 1 choosing S1 and player 2 choosing t2, as well as player 1 choosing S2 and player 2 choosing t1.

Refer to the Payoff Matrix Below