What is the dominant strategy for Bob? Donna? Which strategy should each player choose to maximize the potential gain? What do you think the outcome of this game will be? Carefully explain your answers
What will be an ideal response?
The dominant strategy for Bob is to cheat; either he profits by $16,000 (if Donna agrees) or he profits by $4,000 (if Donna also cheats). The alternative of agreeing could profit him by $10,000 (if Donna also agrees), but it could also cause him to lose $4,000 (if Donna cheats). The dominant strategy for Donna is to cheat; either she profits by $16,000 (if Bob agrees) or she profits by $4,000 (if Bob also cheats). The alternative of agreeing could profit her by $10,000 (if Bob also agrees), but it could also cause her to lose $4,000 (if Bob cheats). If Bob thinks Donna will cheat, he should cheat because the potential payoff is greater. If Donna thinks Bob will cheat, she should cheat because the potential payoff is greater. The maximin strategy for both Bob and Donna would be to cheat. If each cheats, their individual profits will be $4,000 .
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