[Sequential-move games] John Carey, a student studying at Johns Hopkins business school, has a credit card account with VISA. VISA's available strategies are to raise Carey's credit card interest rate or do nothing. Carey's available strategies are to transfer her VISA account balance to another creditor or do nothing. If VISA raises Carey's interest rate and Carey does nothing, VISA earns profits of $1,000 while Carey receives -$1,000. If VISA raises Carey's interest rate and Carey transfers her account to another creditor, VISA receives -$350 while Carey receives -$100. If VISA does nothing and Carey does nothing, each player receives $0. If VISA does nothing and Carey transfers her account to another creditor, VISA receives -$300 while Carey receives -$150.
- Assuming that VISA moves first, what is the Nash equilibrium in this sequential-move game? Please draw the game tree to answer this question.
- Assuming that Carey moves first, what is the Nash equilibrium in this sequential-move game? Please draw the game tree to answer this question.