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Warning: This game is purely for educational purposes and does not condone drug consumption or violence of any kind. After a cooking session with Jesse Pinkman, Walter White sets a meeting with new customer Tuco Salamanca to sell his fresh batch of crystal blue. Neither Walter nor Tuco 2trust each other. They can both decide to bring a gun and rob the other instead of doing the transaction. If they make the transaction, they both receive payment of 1. If one steals from the other, he gets 3 and the other gets zero. If they both try to steal from each other, they get in a gun fight and can both potentially die. The payoff matrix is: Walter White Sells drugs Steals money Tuco Buys drug 1 , 1 0 , 3 Robs drug 3 , 0 -98 , -98 a) Find all pure-strategy Nash equilibrium b) What are the Pareto optima of the game? c) Find the mixed-strategy Nash equilibrium (assume Tuco buys with probability p, and Walter sells with probability q). d) Assume both Walter and Tuco can stay home and get a payment of zero. If they expect to be in the mixed-strategy equilibrium, will find it better to go to the meeting or stay home?.

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