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Suppose A can somehow change the game in problem 5.1 to a new one in which his payoff from Up is reduced by 2, producing the following payoff matrix.
a. Find the Nash equilibrium or equilibria.
b. Which player, if any, has a dominant strategy?
c. Does A benefit from changing the game by reducing his or her payoff in this way?
5. In this question you should assume that the Marginal Propensity to Consume out of permanent income is one [i.e., no bequest motive + perfect consumption smoothing: c1, = c2 = c
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