Prisoner’s dilemma
Paper instructions:

First, describe the basic situation of the case. Second, set it up using a prisoner’s dilemma analysis. Be sure to specifically highlight specifically why the Prisoner’s dilemma can help us to understand the situation, tying specific facts of the case to the PD situation. In doing so, be sure to highlight the central factors of the realist-neo-liberal institutionalist debate.

Then, draw a prediction from the Prisoner’s dilemma about what is likely to occur in this situation. Compare this to the reality of the case. If the Prisoner’s dilemma prediction does not fit reality, present an argument about the relevant factors that are changing state behavior from the Prisoner’s dilemma world. If the Prisoner’s dilemma prediction does fit reality, present an argument about why factors highlighted by the neo-liberal institutionalists were not effective in bringing about cooperation.

Prisoner’s Dilemma
Order Description
Explain the Prisoner’s Dilemma game, the notion of dominant strategy, and the concept of Nash equilibrium and cooperation. Using these concepts, then, analyze the following duopoly game.
Philip Morris and R.J. Reynolds spend huge sums of money each year to advertise their tobacco products in an attempt to steal customers from each other. Suppose each year Philip Morris and R.J. Reynolds have to decide whether or not they want to spend money on advertising. If neither firm advertises, each will earn a profit of $2 million. If they both advertise, each will earn a profit of $1.5 million. If one firm advertises and the other does not, the firm that advertises will earn a profit of $2.8 million and the other firm will earn $1 million.
• If the two companies decide to collude to maximize profits, what will each country do? What profit will each country earn?
• What is the dominant strategy for each company, and what profit will each company earn if they follow those strategies?
• Is the solution you found in the first question a Nash equilibrium?
• Is the solution you found in the second question a Nash equilibrium?
Assignment Expectations (Use Heading for paragraphs)
In the Module 3 Case Assignment, you are expected to:
• Describe the purpose of the paper and provide a conclusion.
• Present information in a professional manner.
• Answer the Case Assignment questions clearly and provide necessary details.
• Write clearly and correctly—that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
• Provide citations to support your argument and place references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references [http://owl.english.purdue.edu/owl/resource/560/01/].
• Type and double-space the paper.
• Whenever appropriate, please use Excel to show supporting computations in an appendix, present economic information in tables, and use the data to answer follow-up questions.
Module 3 – Case
Market Structures
Case Assignment
Explain the Prisoner’s Dilemma game, the notion of dominant strategy, and the concept of Nash equilibrium and cooperation. Using these concepts, then, analyze the following duopoly game.
Philip Morris and R.J. Reynolds spend huge sums of money each year to advertise their tobacco products in an attempt to steal customers from each other. Suppose each year Philip Morris and R.J. Reynolds have to decide whether or not they want to spend money on advertising. If neither firm advertises, each will earn a profit of $2 million. If they both advertise, each will earn a profit of $1.5 million. If one firm advertises and the other does not, the firm that advertises will earn a profit of $2.8 million and the other firm will earn $1 million.
• If the two companies decide to collude to maximize profits, what will each country do? What profit will each country earn?
• What is the dominant strategy for each company, and what profit will each company earn if they follow those strategies?
• Is the solution you found in the first question a Nash equilibrium?
• Is the solution you found in the second question a Nash equilibrium?
Assignment Expectations (Use Heading for paragraphs)
In the Module 3 Case Assignment, you are expected to:
• Describe the purpose of the paper and provide a conclusion.
• Present information in a professional manner.
• Answer the Case Assignment questions clearly and provide necessary details.
• Write clearly and correctly—that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
• Provide citations to support your argument and place references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references [http://owl.english.purdue.edu/owl/resource/560/01/].
• Type and double-space the paper.
• Whenever appropriate, please use Excel to show supporting computations in an appendix, present economic information in tables, and use the data to answer follow-up questions.