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    Question

    Two people enter a bus. Two adjacent cramped seats are

    free. Each person must decide whether to sit or stand. Sitting alone is more comfortable than sitting next to the other person, which is more comfortable than standing. Suppose that each person cares only about her own comfort. Model the situation as a strategic game. Find its Nash equilibrium (equilibria?).
    A (stand, stand) Correct Answer Incorrect Answer
    B (sit, stand) Correct Answer Incorrect Answer
    C (stand, sit) Correct Answer Incorrect Answer
    D (sit, sit) Correct Answer Incorrect Answer
    E Doesn’t exist Correct Answer Incorrect Answer

    Solution

    There exist only one pure strategy Nash equilibrium (stand, stand) and the argument is same as that of Prisoner’s Dilemma discussed in theory.

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