Two players: The employee (Raquel) and the employer (Vera). Raquel has to choose whether to pursue training that costs $1,000 to herself or not.

Vera has to decide whether to pay a fixed wage of $10,000 to Raquel or share the revenues of the enterprise 50:50 with Raquel.

The output is positively affected by both training and revenue sharing. Indeed, with no training and a fixed wage total output is $20,000, while if either training or profit sharing is implemented the output rises to $22,000. If both training and revenue sharing are implemented the output is $25,000.

a. Construct the pay-off matrix.

b. Is there a dominant strategy for Raquel? Why or why not?

c. Is there a dominant strategy for Vera? Why or why not?

d. Find the Nash equilibrium.