Question

Malik is the top employee at the local Deloitte office, and he just received a competing offer from PwC. Deloitte is considering how to retain Malik and is choosing between offering him a one-time money bonus or offering him extra vacation time. Based on what they offer him, Malik can then choose to stay or leave. The payoffs are given in the following sequential game tree: At the Nash equilibrium, Deloitte will choose ____________ and Malik will respond with ____________.There is no Nash equilibrium.Money Bonus ; StayExtra Vacation ; StayExtra Vacation ; LeaveMoney Bonus ; Leave

Answer 1

Answer: Extra Vacation ; Stay

Explanation:

At the Nash equilibrium, Deloitte will choose extra vacation and Malik will respond with stay.

A Nash Equilibrium is the optimal outcome for each player given the decisions of the other player.

Looking at the the sequential game tree, if Deloitte offered a Money Bonus, Malik would leave because it offers him a higher payout. Deloitte would not want this because they gain more when he stays.

If Malik is offered extra vacation however, Malik stands to gain more than every other option if he stays and Deloitte would therefore offer him this because it will still be a gain for them. This is the Nash equilibrium.