Solution (source code)

= Solution

Use the two-by-two <payoff> entries visible in the original PDF. If $q$ is the probability that II uses its first action, I's expected <payoffs> from its two <pure strategies> are $4-q$ and $2q$. Their difference $4-3q$ is strictly positive for every $q\in[0,1]$. Thus I's first action <strict dominance> its second, and every <Nash equilibrium> has I use the first action with probability one. Against that action, II receives 8 from its first action and 4 from its second, so its first action is uniquely optimal. Therefore
$$
\boxed{\text{the only equilibrium pair is }(I_1,II_1),\quad\text{with payoffs }(3,8).}
$$
This excludes nontrivial mixed equilibria as well as the other pure pairs.

For the <maximin bargaining solution>, first compute the two <security level payoffs>. If I uses its first action with probability $p$, its <payoffs> against II's two <pure strategies> are $2+p$ and $4p$. Both increase with $p$, so its best worst-case <payoff> is attained at $p=1$ and is $d_1=3$. If II uses its first action with probability $q$, its <payoffs> against I's two actions are $4+4q$ and $6-6q$. The lower of these is maximized at their intersection,
$$
q=\frac15,\qquad d_2=\frac{24}{5}.
$$
These are separate security calculations, not the expected <payoffs> from a pair of security strategies.

Cooperation permits jointly chosen lotteries, giving the <convex hull> of the four <payoff>. The <vector> $(3,8)$ dominates $(2,0)$ and $(0,6)$, so the <Pareto frontier> is the segment from $(3,8)$ to $(4,4)$, with equation $v=20-4u$. Individual rationality relative to $d=(3,24/5)$ restricts this to
$$
3\le u\le\frac{19}{5},\qquad v=20-4u.
$$
On this <negotiation set>, the <Nash product> is
$$
P(u)=(u-3)\left(\frac{76}{5}-4u\right),\qquad
P'(u)=\frac{136}{5}-8u,\quad P''(u)=-8.
$$
Its unique maximizer is interior, giving
$$
\boxed{(u_*,v_*)=\left(\frac{17}{5},\frac{32}{5}\right).}
$$
One implementing binding agreement always uses I's first action and uses II's first action with probability $3/5$, its second with probability $2/5$. This agreement raises both <payoffs> above their security levels, but II receives $32/5<8$, less than at the noncooperative equilibrium. Thus \b[player II prefers the noncooperative game under the specified maximin bargaining rule]. The cooperative feasible set contains the equilibrium <payoff>; it is the particular arbitration rule, not an inability to cooperate at that <payoff>, that produces II's lower allocation.