The document presents a payoff matrix for a prisoner's dilemma game between two players, Mike and Nancy. It shows the different outcomes and payoffs depending on whether each player chooses to cooperate or cheat. No matter what the other player chooses, each player receives a higher payoff by cheating instead of cooperating. Therefore, the equilibrium for both players is to choose the cheating strategy. Modifying the payoffs to include a penalty for cheating turns it into a coordination game where both players are incentivized to cooperate.

1. Payoff matrix for a prisoner's dilemma
Mike
cheat cooperate
Nancy
cheat
5
5
2
15
cooperate
15
2
10
10

2. What should Mike do if Nancy’s
strategy were to cheat?
Mike
cheat cooperate
Nancy
cheat
✔ 5
5
2
15

3. What should Mike do if Nancy’s
strategy were to cooperate?
Mike
cheat cooperate
Nancy
cooperate
✔15
2
10
10

4. Mike should cheat no matter what
strategy Nancy chooses.
Mike
cheat cooperate
Nancy
cheat
✔5
5
2
15
cooperate
✔15
2
10
10

5. Nancy should cheat no matter what
strategy Mike chooses.
Mike
cheat cooperate
Nancy
cheat
5
5✔
2
15✔
cooperate
15
2
10
10

6. Equilibrium in a prisoner's dilemma
Mike
cheat cooperate
Nancy
cheat
✔5
5✔
2
15✔
cooperate
✔15
2
10
10

7. State coercion and the former
prisoner's dilemma
Mike
cheat cooperate
Nancy
cheat
5-6=-1
5-6=-1
✔2
15-6=9
cooperate
15-6=9
2✔
✔10
10✔