var imagesXXXlarge = ",,,,,"; var imagesXXlarge = ",,,,,,"; var imagesXlarge = ",,,,"; var imagesLarge = ",,,,,"; var imagesSmall = "krugmanap2e-ch65-fig-5,krugmanap2e-ch65-fig-6,,,"; var imagesMedium = ",,,,,"; xBookUtils.showAnswers['krugmanapecon2e_mod65_cyu_1a'] = "A Nash equilibrium is a set of actions from which neither side wants to deviate (change actions), given what the other is doing. Both sides building a missile is a Nash equilibrium because neither player wants to deviate from the decision to build a missile. To switch from building to not building a missile, given that the other player is building a missile, would result in a change from –10 to –20 utils. There is no other Nash equilibrium in this game because for any other set of actions, at least one side is not building a missile, and would be better off switching to building a missile."; xBookUtils.showAnswers['krugmanapecon2e_mod65_cyu_1b'] = "The total payoff is greatest for Margaret and Nikita when neither side builds a missile, in which case their total payoff is 0 + 0 = 0. "; xBookUtils.showAnswers['krugmanapecon2e_mod65_cyu_1c'] = "This outcome would require cooperation because each side sees itself as better off by building a missile. If Margaret builds a missile but Nikita does not, Margaret gets a payoff of +8, rather than the 0 she obtains if she doesn’t build a missile. Similarly, Nikita is better off if he builds a missile but Margaret doesn’t: he gets a payoff of +8, rather than the 0 he obtains if he doesn’t build a missile. Indeed, both players have an incentive to build a missile regardless of what the other side does. So unless Nikita and Margaret are able to communicate in some way to enforce cooperation, they will act in their own individual interests and each will pursue its dominant strategy of building a missile."; xBookUtils.showAnswers['krugmanapecon2e_mod65_cyu_2a'] = "Refer students to More Games. There are no dominant strategies in this game because each player's best outcome depends on the strategy of the other player. Two Nash equilibria exist: both players going to the nightclub and both players going to the movie theater. "; xBookUtils.showAnswers['krugmanapecon2e_mod65_fr_2_rubric'] = "
Rubric for FRQ 2 (5 points)
1 point:The firm and strategy labels are correctly placed as shown above.
1 point:The payoffs are listed correctly in the payoff matrix for part a as shown above.
1 point:Each firm has a dominant strategy of choosing a low price.
1 point:There is a Nash equilibrium of each firm choosing a low price.
1 point:The payoffs are listed correctly in the payoff matrix for part d as shown below.
"; var fyih3 = '