Deciding to Join Customer Loyalty Program at Bonsai Plants and Books
What is the Nash equilibrium?
What are the equilibria?
Answer:
There are two Nash equilibria in this scenario: both join, and both do not join.
The situation presented in the data is known as the Prisoner's Dilemma. In this dilemma, Kat is deciding whether to join the customer loyalty plan at Bonsai Plants and Books, along with Patrick. The outcomes and payoffs are shown in the table provided:
| Patrick Joins | Patrick Does Not Join | |
|---|---|---|
| Kat Joins | 200 | 200 |
| Kat Does Not Join | 1000 | 500 |
Based on the payoffs, the Nash equilibrium occurs when both players make the best decision for themselves considering the other player's decision. In this case, the Nash equilibrium is reached when both Kat and Patrick do not join the customer loyalty program, as it results in the best overall outcome for both of them.
Therefore, in the context of the Prisoner's Dilemma scenario at Bonsai Plants and Books, the Nash equilibrium is when both Kat and Patrick do not join the customer loyalty program.
It is important to note that Nash equilibrium is a concept in game theory where each player's strategy is optimal given the other player's strategies. In this case, both players not joining the loyalty program is the best outcome for both parties.