Problem
Using 300 to 500 words answer the question below:
Rabin (1993) argues that if we assume reciprocal preferences then it is possible to transform the prisoner's dilemma game into a stag-hunt game with two payoff ranked equilibria.
1. Write down the payoff matrix for a representative prisoner's dilemma game.
2. Then clearly explain how the Rabin argument works. In doing so you must.
3. Show a second payoff matrix to illustrate any changes in the payoffs from the first payoff matrix that you created. Explain how this second game has two payoff ranked equilibria.