Question

Consider a simultaneous move game between a union and a company. If both the parties bargain hard, cach would gain nothing. If only one party bargains hard the accommodating party gets a profit of $1 million while the bargaining party gets a $5 million, while if they both accommodate, they each get $3 million. What would be the Nash equilibrium of this game? Oa Bargain hard, bargain hard Ob. Firm bargains hard, union accommodates OC. Union bargains hard, firm accommodates Od Both B&C

Answer 1

d. Both B&C

Step-by-step explanation:

The Nash equilibrium can be described as a stable condition relating to the interaction of different players whereby a unilateral change in the strategy of a player will result in no gain for the any of the players.

Since bargaining hard by both parties in the will result in no gain for both parties, the the Nash equilibrium of this game would therefore for either of one of the two parties to bargain hard and the other to accommodate.

Therefore, option "d. Both B&C" is the correct answer.