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Economics

Two lawyers go to an expensive restaurant. They can order the appetizer (A) or the main course (M). Each gets utility worth $10 from the appetizer and utility worth $15 from the main dish. The price of the appetizer is $7, and the price of the main course is $13.

a. First assume that each lawyer will pay his own bill. Describe their decision making process as a normal form game (describe the payoff matrix). Identify the Nash equilibrium or equilibria. Do you think that the Nash equilibrium or equilibria is a reasonable solution for this game?

b. Next assume that they decide to split the total bill, half and half. Describe their decision making process as a normal form game. Will the lawyers behave differently compared to the way they would under situation (a)? Have you encountered this game in class before?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91529766

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