5.1 Two construction companies, Ahmad and Zayed, enter into one-time shot game: they agree that each will provide X effo

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5 1 Two Construction Companies Ahmad And Zayed Enter Into One Time Shot Game They Agree That Each Will Provide X Effo 1 (118.84 KiB) Viewed 33 times

5.1 Two construction companies, Ahmad and Zayed, enter into one-time shot game: they agree that each will provide X effort to build a park, whereas they would split equally the profit of $6 million. Each company can either cooperate and offer X or defect and offer 12X—while each one does not know what the other has chosen (simultaneous game). As the payoff show below, if both defect, they would be splitting $4 million. But if only one company defects, the defector will earn $4 and the cooperator will earn $1 million. Ahmad Construction Co. Cooperate Defect Cooperate 3,3 1,4 Zayed Construction Co. Defect 4, 1 2.2 a. Are there pure-strategy Nash equilibrium or equilibria? Does it matter what the other is choosing? b. Let us suppose that the two companies agree to cooperate while swearing on their respective holy books. While each company does not believe it will be punished by God, each company thinks that the other would be punished by God, i.e., fearful of eternal hell. What would the pure-strategy Nash equilibrium or equilibria under these assumptions? Does it matter what the other is choosing?