# Rasmussen College Deliverable 03 Nash Equilibria Analysis Worksheet

Question Description

I’m working on a mathematics question and need support to help me learn.

Assignment ContentCompetencyThis competency will allow you to demonstrate your ability and skill in applying concepts of Nash equilibrium.
Student Success CriteriaView the grading rubric for this deliverable by selecting the “This item is graded with a rubric” link, which is located in the Details & Information pane.
InstructionsA local law firm has hired G&B consulting to help determine a business strategy. There is a competing firm in the area and recently the two firms have begun talks in regards to a merger. The merger would mean there are more shared resources than either had before individually. There would also be less competition for both companies. Both would be able to operate more efficiently, however it would take a strong commitment from both sides for the merger to be successful. The law firm that has hired you wants to know their optimum strategy in this situation.

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Deliverable 03 – Worksheet
1. Market research has determined estimates for each law firm’s expected profits for the
various outcomes of this scenario. If both firms agree to the merger then each should
individually expect a profit of 20 million in the next year. If our client agrees to the
merger while the competitor does not, our client would expect profits of 7 million in the
next year while the competitor would expect profits of 25 million. If the decisions were
reversed then the payouts would also be reversed. If neither firm agrees to the merger
then both would expect profits of 15 million in the next year.
Construct a payoff matrix to represent the profits (in millions of dollars) for each firm
under the different outcomes.
2. Use the payoff matrix from number 1 to determine if a dominant strategy exists for
either firm. Show all of your work.
3. Use the payoff matrix from number 1 to determine any Nash equilibrium points. Show
4. Explain your recommendation to the client, citing your work from number 2 and number
3.
5. Working in parallel your co-worker wants to make the recommendation that the client
should agree to the merger no matter what as it will give the chance of obtaining the
highest profits. Do you agree with this strategy? Explain why or why not.

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Tags:

Payoff Matrix

nash Equilibrium

optimum strategy

different outcomes

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