Question: (Requires calculus) The following matrix shows why we may not see many people playing chicken in real life. Assume that Jones and Smith are playing it and the payoffs are:
Show that in the Nash equilibrium each goes straight with probability of 0.36 (i.e., 40/110). Then show that the expected payoff for each player is negative. When the value to each driver of winning is $50, they will not play the game. How high must this amount be (for each of them) for a driver to want to play because the game now has a positive expected value?