Example 1 – Prisoner's Dilemma
Two suspects: stay silent (cooperate) or confess (defect)?
Confessing is dominant but leads to the worst joint outcome. 2×2 · dominant strategy · social dilemma
Example 2 – Coordination Game
Two firms choose an industry standard. A market only exists if both choose the same one. 2×2 · two Nash equilibria · coordination problem
Example 3 – Price Negotiation
Buyer and seller negotiate over high or low price. If they agree, both gain. 3×3 · multiple Nash equilibria · Pareto analysis
Rows (↓) = Strategies of
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Columns (→) = Strategies of
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Cell = (Payoff P1, Payoff P2)
Step-by-Step Analysis
Payoff Space – Graphical View
🟢 Nash Equilibrium🟡 Pareto-efficient (not dominated)⚪ Dominated point