Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250 per week and a risky job that pays $300 per week. The value of safety to each is $75 per week. Having more income than the other is worth $75 per week to each, and having less income than the other means a $75-per-week reduction in satisfaction. Having the same income as the other means no change in satisfaction. The payoff matrix below summarizes this situation. In this game, we can predict that choosing the risky job will:
A)give Matt more satisfaction only if Gabe chooses the risky job.
B)give Matt more satisfaction only if Gabe chooses the safe job.
C)give Matt more satisfaction no matter which job Gabe chooses.
D)never give Matt more satisfaction.

Question

Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250 per week and a risky job that pays $300 per week. The value of safety to each is $75 per week. Having more income than the other is worth $75 per week to each, and having less income than the other means a $75-per-week reduction in satisfaction. Having the same income as the other means no change in satisfaction. The payoff matrix below summarizes this situation.  In this game, we can predict that choosing the risky job will:
A)give Matt more satisfaction only if Gabe chooses the risky job. 
B)give Matt more satisfaction only if Gabe chooses the safe job. 
C)give Matt more satisfaction no matter which job Gabe chooses. 
D)never give Matt more satisfaction.

Quizplus · Accepted Answer

If both Matt and Gabe choose the safe job, they both receive a payoff of $250 and have no change in satisfaction. If both choose the risky job, they both receive a payoff of $300 and have no change in satisfaction. However, if one chooses the safe job and the other chooses the risky job, the person who chooses the risky job will receive a higher payoff of $300, while the person who chooses the safe job will receive a lower payoff of $250. In this scenario, the person who chooses the risky job (either Matt or Gabe) receives an additional $75 in satisfaction for having more income than the other. So, whichever person chooses the risky job will receive a higher payoff and more satisfaction. Therefore, the best choice for both Matt and Gabe is to choose the risky job.

Suppose Matt and Gabe Must Both Choose Between Two Jobs