Consider the following Bach or Stravinsky coordination game with utilities (URow, UCol):
Table 2: The Bach or Stravinsky Game
Col
L R
Row U 9,3 0,0
D 0,0 4,6
(a) Identify all of the pure-strategy Nash equilibria for this problem. Explain whether or not the Nash equilibria are efficient.
(b) Explain how the government’s role, if one exists, is both to create efficiency and to redistribute wealth.
(c) Suppose that the (D, R) payoffs were 3, 9 instead of 4, 6. What role can government play in this case?