1957(Table: Cell Service) Refer to the Table

question 41

Essay

1957(Table: Cell Service) Refer to the table. Mr. Brooks and Ms. Gertrude are good friends who like to talk on the phone. Each is deciding on a cell phone service to sign on with, where each service offers free unlimited calls to other customers who subscribe to the same service. The payoff table shows the rewards to Mr. Brooks and Ms. Gertrude from choosing either cell service A or
B. a. What is(are) the Nash equilibrium(s) in this coordination game? b. Which equilibrium will Mr. Brooks and Ms. Gertrude end up at? Explain your answer. c. Does the coordination game get easier or harder if there are 100 friends instead of just 2? Explain.
A. a. There are two Nash equilibriums-(A, A) and (B, B) b. If Mr. Brooks and Ms. Gertrude are the only "players" in this game, they could probably talk to each other and coordinate on the best equilibrium (B, B). However in reality the coordination is between Mr. Brooks, Ms. Gertrude, and many other people, and so coordinating on the best equilibrium may be very costly or impossible. In this case, the final equilibrium may come down to other random factors such as which company is better at marketing its service, which company gives out free phones, etc. c. Harder. See answer to part b.

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