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    Question

    Consider a bargaining game:

    Find pure strategy Nash equilibrium.

    A {low, yes} Correct Answer Incorrect Answer
    B {low, low} Correct Answer Incorrect Answer
    C {yes, yes} Correct Answer Incorrect Answer
    D {yes, low} Correct Answer Incorrect Answer

    Solution

    Suppose 1 chooses “low” then best response of 2 will be to choose “yes”. Now consider the other way round if 2 chooses “yes” then 1’s best response will be “low”. So neither of two would want to deviate. Applying the same logic to other points we deduce {low, yes} is the only Nash Equilibrium.

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