Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 24

Consider a two-player, sequential-move game where each player can choose to play right or left. Player 1 moves first. Player 2 observes player 1's actual move and then decides to move right or left. If player 1 moves right, player 1 receives $0 and player 2 receives $25. If both players move left, player 1 receives -$5 and player 2 receives $10. If player 1 moves left and player 2 moves right, player 1 receives $20 and player 2 receives $20.
a. Write the above game in extensive form.
b. Find the Nash equilibrium outcomes to this game.
c. Which of the equilibrium outcomes is most reasonable? Explain.