Question

Elly owns a small coffee shop. She has only one employee. One weekend, she decided to take a break from work. She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. On the other hand, if she trusts him, he can either cooperate and run the shop, or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose. Refer to the scenario above. Elly should use to make her decision.

A. backward induction
B, mixed strategies
C. her dominant strategy
D, forward induction

Answer 1

A. backward induction

Step-by-step explanation:

Based on the information provided within the question it can be said that Elly should use a backward induction strategy to make her decisions. This term refers to moving backwards from the end of a problem, in order to choose the best set of actions for the solution. Since Elly has many variables she should just state the problem that she is currently facing and choose the best solution for every step of the way.