Chapter Two

1. Consider a game in which there are two peasant farmers. One has land on which it is slightly better to grow corn, and the other has a land on which it is slightly better to grow wheat. They want to buy a simple harvesting machine together that can be used only for corn or for wheat. What kind of coordination game is this? Is it a Stag Hunt, Battle of the Sexes, or a Pure Coordination game? Explain.

2. Suppose that one player abides by one convention over the use of a resource, while a second player abides by another. Show in the context of a Hawk-Dove game how this can produce conflict.

3. Consider an application of the Prisoners' Dilemma to cooperatives. Suppose that a development institution establishes an agricultural cooperative. There are n people in each cooperative, who equally share all of the output. Each person in the cooperative can produce 100 pesos/day, and the effort for each person to produce this amount is given by e. What is the threshold number of people in the cooperative below which people will still choose to Work rather than Shirk?

4. Is it possible to turn a Prisoners' Dilemma game into a coordination game by changing only one player's payoffs? If so, which payoff? If not, what kind of game results when only one payoff is changed?