Big Pig and Little Pig Have Two Possible Strategies, Press

question 3

Multiple Choice

Big Pig and Little Pig have two possible strategies, Press the Button, and Wait at the Trough.If both pigs choose Wait at the Trough, both get 2.If both pigs choose Press the Button, then Big Pig gets 5 and Little Pig gets 5.If Little Pig presses the button and Big Pig waits at the trough, then Big Pig gets 10 and Little Pig gets 0.Finally, if Big Pig presses the button and Little Pig waits at the trough, then Big Pig gets 6 and Little Pig gets 2.In Nash equilibrium,

• A)Little pig will get a payoff of zero.
• B)Little Pig will get a payoff of 5 and Big Pig will get a payoff of 5.
• C)both pigs will wait at the trough.
• D)Little Pig will get a payoff of 2 and Big Pig will get a payoff of 6.
• E)the pigs must be using mixed strategies.

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Definitions:

Willingness To Pay

The maximum amount an individual is prepared to spend on a good or service, reflecting the value they assign to it.

Entry Barriers

Factors that prevent or hinder the ability of a new firm to enter and compete in an industry.

Market Structures

The organizational and other characteristics of a market, including the number and size of firms, extent of competition, and type of product differentiation, impacting the behaviour and profitability of businesses within the market.

Quantity Effect

The change in total revenue resulting from a unit change in quantity sold, while holding price constant.