Two athletes of equal ability are competing for a prize of $12,000. Each is deciding whether to take a dangerous performance-enhancing drug. If one athlete takes the drug and the other does not, the one who takes the drug wins the prize. If both or neither take the drug, they tie and split the prize. Taking the drug imposes health risks that are equivalent to a loss of XX dollars.
Complete the following payoff matrix describing the decisions the athletes face.
Player Two’s Decision
Take Drug Don’t Take Drug
Player One’s Decision Take Drug , ,
Don’t Take Drug , ,
True or False: The Nash equilibrium is taking the drug if X is greater than $6,000.
Suppose there was a way to make the drug safer (that is, have lower XX).
Which of the following statements are true about the effects of making the drug safer? Check all that apply.
It increases the payoff of taking the drug.
It lowers the likelihood of taking the drug.
It has no effect on the athletes’ decision to take the drug if X remains greater than $6,000.