The Players: The Rules: No hard question, no easy questions, polite applause at the end The Consequences: No Indian

Night for you! The Payoffs: Indian Night for you!

Background
Year 2000, Firestone supplies tyres to Ford for Explorer SUV

There were several fatal blowouts on Explorers, all using Firestone tyres.

However there were no blowouts on other vehicles using the same tyres.

Initially, the companies collaborated on finiding a fix.

Unexpectedly, a blame game arose between Ford and Firestone.

As things got worse, they fell prey to the Prisoners Dilemma and both companies suffered.

The Game

1 NASH Equilibrium [-100,-100] [Bridgestone talks , Ford talks] 1. Both companies are better of collaborating and receiving lesser penalties [-30,-30] 2. However if they appear to collaborate with each other, each company will be find favor in switching strategy as there is a better payoff possible. 3. This will result in a Nash Equilibrium forming at [-100,-100] and staying there.

The Solutions
Collaborate/Collude Incentivize

Background
Before 1930s women could sue for breach of promise

Later Courts changed their minds! But the men could not be trusted!

Couples didnt want to wait to till marriage to sleep together. The Solution? An Expensive Engagement Ring

The trend seemed to be widely accepted! The ring was Reassurance

In case of breakup? Ring acted as financial compensation.

Women found it hard to remarry and also the social stigma. No real consolation!

Assumptions
Man has already proposed to the woman. Her decision is awaited. Man and woman have slept together at least once after proposal acceptance

Ring is very expensive and can not be returned under any circumstances

Broken engagement has more severe consequences on women than men

Man
Woman Engagement ring

= = =

Cal Kate Heart of the ocean

The Game
(1000 , 1000) Proposal Accept

Reject (-250 , 0)

?
Cal: 5
500 100 200 900 -250 -1500 (-250 , 0) (1000 , 1000) (-200, -1100)

(-200, -1100)

PAYOFFS 1 2 3 4 5 6 Heart of the ocean Sleep Together Next Marriage Happy Marriage Shattered Ego Social Stigma

Kate: No effect Kate: 2 + 4 Kate: 1 + 2 - 3 + 6

Cal: 2 + 4 Cal: 2 + 3 - 1

The Game (contd)

Cal Stay Kate Accept Reject 1000,1000 000,-250 Break -4600,-200 000,-250

2 NASH Equilibriums [1000,1000] [Kate stay , Cal stay] 1. If Kate chooses to Accept, then Cal has better incentive to Stay 2. If Kate Rejects, then both players receive a lesser payoff than if she Accepts. o The 2nd Nash Equilibrium is less likely because if Kate rejects, then Cal does not have the option to break the engagement.

BACKWARD Induction
(1000 , 1000) (-250 , 0)

v/s v/s

(-200 , -1100) (-250 , 0)

(1000 , 1000)

v/s
(-250 , 0)

(1000 , 1000)

The Game Changers

Proposal Accept Stay with Kate Break Kates trust Run away with Jack

Reject (-250 , 0)

Stay with Cal

(-450 , 0)

(550 , 550)

(100 , -1100)

(400 , -1100)

PAYOFFS Heart of the ocean Sleep Together Next Marriage Happy Marriage Unhappy Marriage Shattered Ego Social Stigma Madam Aubert Molly Brown

500 100 200 900 450 250 -1500 600 300

The Game Changers (contd)

Cal
Stay Break (MA) -1100,400 -1100,400 Break (MB) -1100,100 -1100,100 Stay Break 550,550 0,-450

Kate

2 NASH Equilibriums [550,550] [Kate stay , Cal stay] 1. If Kate Stays, then Cal will stay 2. Whatever Cal chooses, Kate will want to stay o The 2nd Nash Equilibrium is less likely because if either player choose to break the engagement, then the other player doesnt have the option to break the engagement again.

BACKWARD Induction
(550 , 550) (400 , -1100)

v/s v/s

(-450 , 0) (100 , -1100)

(550 , 550)

v/s
(-250 , 0)

(550 , 550)